TMI Blog2016 (8) TMI 1365X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Revenue by: Ms. Neera Malhotra, CIT O R D E R PER SHRI A.K.GARODIA, AM These are cross appeals filed by the assessee and the revenue which are directed against the assessment order passed by the AO on 29-01- 2015 u/s 143(3) r.w.s.144C of the IT Act, 1961, as per the directions of DRP. 2. The grounds raised by the assessee in IT(TP)A No.282(B)/2015 are as under; Based on the facts and circumstances of the case and in law, H M Mauritz India Private Limited ( H M India' or Appellant or the Company ) respectfully craves leave to prefer an appeal against the order passed by Deputy Commissioner of Income Tax, Circle-3( 1)( I) ('the learned Assessing Officer' or 'the AO'), dated 29 January 2015 for A Y 20 I 0-11, under section 143(3) read with section 144C(13) of the Income Tax Act, 1961 ('Act') in pursuance of the directions issued by Dispute Resolution Panel ('DRP'), Bangalore dated 19 December 2014 under section I 44C(5) of the Act ('the impugned order') inter-alia on the following grounds: In the facts and circumstances of the case and in law: General Grounds I. The impugned order and directions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entions of Appellant in respect of erroneous inclusion of the said companies as comparables. 9. The learned DRP erred in rejecting certain valid comparables considered by the Appellant in the comparability analysis, by upholding the approach of TPO in applying arbitrary filters. Ma Foi Global Services and Ma Foi Management Consultants Ltd. - Erroneously rejected based on different financial year ending filter Overseas Manpower Corpn. Ltd.- Erroneously rejected based on (a) peculiar circumstances i.e., declining sales and (b) the same being not discussedl adjudicated by the Hon'ble DRP in its directions. Inhouse Productions Ltd, India Tourism Development Corporation Ltd and ICRA Management Consulting Services Ltd. - Erroneously rejected based on perceived functional difference which is factually incorrect, since the TPO/ DRP failed to consider the information pertaining to segmental results and business description provided in the annual reports of the said companies. EDCIL (India) Ltd.- Erroneously rejected based on the contention that revenue from service was less than 75% of the total revenue, which is factually incorrect since the TPO failed to consider the informat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the TPO. 11. For these and other grounds that may be urged at the time of hearing, it is prayed that the directions of the DRP in sofar as it relates to the above grounds may be reversed. 12. The appellant craves leave to add, alter, amend and/or delete any of the grounds mentioned above . 4. It was submitted by the ld.AR of the assessee that it can be seen that on page-18 19 of the TPO s order, the TPO has selected six comparables having average margin of 27.74%. He also submitted that on page-3 of the TPO s order, the TPO has worked out assessee s margin percentage at 12.06%. Out of these six comparables, DRP has directed the AO/TPO to exclude two comparables i.e. M/s HCCA Business Services Pvt. Ltd., and M/s TSR Darashaw Ltd., for which the revenue is in appeal and the assessee in its appeal is pleading for exclusion of two more comparables i.e. M/s Aptico Ltd., and M/s Global Procurement Consultants Ltd., He submitted that if the appeal of the assessee on account of exclusion of these two comparables is allowed and the appeal of the revenue against exclusion of two comparables by the DRP is dismissed then there will be two remaining comparables i.e. M/s Cyber M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany i.e. M/s HCCA Business Services Pvt.Ltd., (Supra), he fairly conceded that as per para-46 of this Tribunal order, the issue regarding exclusion of this company was kept open by the Tribunal. He submitted that in the present case also, even if it is held that one company i.e. M/s HCCA Business Services Pvt. Ltd., is accepted as a good comparable, then also the average profit margin of remaining 3 comparables i.e. M/s Cyber Media Research Ltd., 14.85%, M/s HCCA Business Services Pvt.Ltd., 20.05% and M/s Quadrant Communications Ltd., 13.11% will be 16% only as against profit margin of the assessee company of 12.06% which is within +=5% range and therefore, no TP adjustment can be made in that situation also. 9. The ld. DR of the revenue supported the order of the AO/TPO. 10. We have considered the rival submissions. We find that as per para-13 of the TPO s order, he has considered six companies as good comparables having average profit of 27.74%. On page-3 of the TPO s order, the assessee s profit margin has been noted as 12.06%. Now as per arguments of the ld. AR of the assessee, two companies M/s Aptico Ltd., (Supra) and M/s Global Procurement Consultants Ltd., (Supra) s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is functional comparable. The ITAT Delhi I-2 Bench in the case of International SOS Services Ltd. vs. DCIT in ITA 1631/Del/2014 order dt. 8.12.2015, at para 4 has held as follows. 4. Global Procurement Consultant Limited: 12.6 The ld. Counsel for the assessee submitted that this is an 100% Government owned company as it is promoted by Exim Bank. He vehemently contended that functionally, this company is not a comparable, as it works with in the field of power, water resources, transportation industry such as economic, textile, mining, cement, leather, health education, environment, InfoTech etc. The pith and substance of the submission are that the areas in which this company provides support services is totally different from the type of support services provided by the assessee. He placed reliance on the decision of the Hon ble Delhi High Court in the case of Rampgreen Solutions Pvt. Limited vs. CIT, ITA No. 102/2015 judgment dated 10/08/2015 for the proposition that functionally dissimilar companies cannot be taken as comparables. He pointed out that decision of the Spl. Bench of the Tribunal in the case of Global India Pvt. Limited has been overruled by the Hon ble Delh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be applied to the facts of the case on hand. In view of the above discussion. we are of the considered opinion that Global Procurement Consulting Limited has rightly be taken as the comparable by the TPO. Hence we dismiss this argument of the assessee. Consistent with the view taken therein, we agree with the Ld.TPO that this company has to be taken as functionally comparable. But this company is also undertaking many other activities such as valuation etc. The issue for consideration would be as to whether segmental data is available. If such data is available then the company has to be taken as a comparable. As the argument of the Ld.Counsel for the assessee is that there are no segmental results available, this company is directed to be excluded as a comparable. (c) Quippo Valuers and Auctioneers Private Limited:- (QVAPL) The Ld.Counsel for the assessee submitted that this comparable needs to be rejected for the reason that the functional profile is different from the assessee company as the company is engaged in providing asset management services as an auctioneer and valuer for construction equipment, earth moving machineries, commercial vehicles and other assets. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mparable as 57.4% of its income is from share registry services segment. This shows the functional profile of the assessee is different. In the case of Miscrosoft Corporation Ltd. (supra) at para 1 the Tribunal has held as follows. Coming to the merits of comparability, we find that this company has three segments, which inter alia include: Pay Roll and Trust Fund activity (Pay Roll) . It is this segment which has been considered by the assessee as comparable. This company on an overview is a broking and investment banking house. Its other segments are : Registrar and Transfer Agent activity (R D) and Records management activity (Records) . The segment of Pay Roll was considered by the assessee as comparable in its TP study report and the same is now assailed. Under the Pay Roll segment, this company undertakes pay roll and employee trust fund administration and management. When we compare the nature of pay roll activity undertaken by this company with the marketing support services rendered by the assessee to its AEs, we find that both are way apart from each other. There can be no logical comparison between a specific pay roll services rendered by a company to its ..... 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