TMI Blog2018 (7) TMI 1475X X X X Extracts X X X X X X X X Extracts X X X X ..... order and remit the matter to the file of AO for deciding it afresh as per law, after allowing a reasonable opportunity of being heard to the assessee. - ITA No.1408/Del/2015 - - - Dated:- 19-7-2018 - SHRI R.S. SYAL, VICE PRESIDENT AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER For The Assessee : Shri Neeraj Jain, Advocate And ShriRamit Katyal, CA For The Department : Shri Sanjay I Bara, CIT, DR ORDER PER R.S. SYAL, VP: This appeal filed by the assessee is directed against the final assessment order dated 14.01.2015 passed by the Assessing Officer (A.O.) u/s 143(3) read with section 144C(13) of the Income-tax Act, 1961 (hereinafter also called the Act ) in relation to the assessment year 2010- 11. 2. The first issue raised in this appeal is against the transfer pricing addition made by the A.O. for a sum of ₹ 86,70,078/- in Marketing and after-sales support services characterized by the assessee as Service fee received . 3. Briefly stated, the facts of the case are that Philip Morris Services India S.A. is a company incorporated in Switzerland and is a wholly owned subsidiary of FTR Holding S.A. (Swiss holding company). The Indian opera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng expenses (DME), including, events sponsorship and agency costs; Trade marketing expenses (TME), including, sale materials, trade events, display rentals, trade and brand support expenses; allowances and travel costs to the assessee on a mark-up of 10%. In a nutshell, the assessee rendered marketing support services for its AE in connection with sale of tobacco products in India, Nepal, Bangladesh and Afghanisthan. With the above understanding of the nature of functions carried out by the assessee under this international transaction, we will now espouse for determination the four comparable companies challenged by the assessee in seriatim. i. Apitco Limited. 5. The assessee argued against the functional incomparability of this company before the TPO by putting forth that this company was providing high-end diversified activities. Such contention did not find favour with the TPO, who treated this company as comparable by including its OP/OC at 40.09%. 6. We have analyzed the Annual report of this company which is available at page 34 of the paper book. From this report, it can be seen that its Income from operations stands at ₹ 15,41,75,273/-, break-up of wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble jurisdictional High Court in the case of Rampgreen Sales Pvt. Ltd. vs. CIT (2015) 377 ITR 533 (Del) in which it has been held that the comparables are to be selected on the basis of similarity even under TNMM. The Hon ble High Court has laid down that selection of comparables does not differ with the method adopted. Ex consequenti , it is no more open to argue that the functional dissimilarity of the companies under the overall broader category can be ignored under the TNMM. 10. In view of the foregoing discussion, we find that the functionally similarity of Apitco Limited is lacking on entity level with the assessee company. As such, we order for its exclusion from the final set of comparables. Similar view has been taken by the Tribunal in assessee s own case for the immediately preceding year, a copy of which has been placed on record. ii. Global Procurement Consultants Limited 11. The TPO included this company in the list of comparables despite the assessee s objection that it is engaged in providing consultancy services and review of procurement processes for various projects funded by the World Bank. The assessee failed to convince even the DRP for i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts. When we go through the nature of services provided by this company, which basically aim at providing advice on procurement and also carrying out procurement audit, it becomes palpable that there is an absolute mismatch with the services provided by the assessee. The services provided by Global Procurement Consultants Ltd. are miles apart from those rendered by the assessee, which, in turn, are confined to market support. By no standard, Global Procurement Consultants Ltd., can be considered as comparable with the assessee company. We, therefore, order for the elimination of this company from the list of comparables. Similar view has been taken by the Tribunal in its order for the immediately preceding year in assesse s own case. iii. TSR Darashaw Limited. 13. The assessee objected to the inclusion of this company by arguing that the business segments of this company are, Registrar and Transfer Agent activity; Records management activity; and Payroll and trust fund activity. Not convinced with the assessee s submissions, the TPO treated it as comparable on entity level, against which the assessee is before us. 14. Having heard the rival submissions and perused the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat this company is basically rendering Asset management services. From the Operational review given in the Director s report, it is overt that this company is engaged in sale of construction and earthmoving equipments through auctions and also by means of innovative disposal methodologies; execution of live auctions for financial institutions in the eastern part of the country; and provision of valuation services to a number of clients in respect of assets including construction equipment, barges and other industrial assets. The assessee also raked up such dissimilarities before the TPO, who did not controvert the functional profile of this company. In view of the fact that this company is mainly providing Asset management services of the nature discussed above, the same cannot be considered as comparable with the market support services rendered by the assessee. We, therefore, direct to exclude this company from the list of comparables. 17. No other issue in relation to the determination of the ALP of this international transaction was raised before us. 18. To sum up, we set aside the impugned order on the issue of transfer pricing addition in the international transactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is observed that similar disallowance was made by the Assessing Officer u/s 40(a) for the immediately preceding assessment year. When the matter came up for consideration before the Tribunal, the matter was sent back to the authorities below for re-adjudication in the light of the evidence which the assessee proposed to file. This view was taken by considering the decision of the Tribunal for the assessment year 2008-09. Adverting to the facts of the instant case, we find that the DRP has not considered the assessee s claim for non-deduction of tax at source in the light of the respective Double Taxation Avoidance Agreements (DTAA). It is further observed that the assessee did not adduce necessary Agreements with the payees before the Assessing Officer. Since the orders of the authorities below are silent on these vital aspects having bearing on the application of section 40(a), respectfully following the precedent, we set aside the impugned order and remit the matter to the file of AO for deciding it afresh as per law, after allowing a reasonable opportunity of being heard to the assessee. 22. In the result, the appeal is allowed for statistical purposes. The order pronounce ..... X X X X Extracts X X X X X X X X Extracts X X X X
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