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TMI Blog2018 (7) TMI 1475X X X X Extracts X X X X X X X X Extracts X X X X ..... olding S.A. (Swiss holding company). The Indian operations are carried on by the Indian Branch of Philip Morris Services which is primarily in import and distribution of Marlboro brand of cigarettes in India. It also provides market support services to its associated enterprise (AE) in India and certain other countries. The assessee filed return declaring total income of Rs. 3.15 crore and odd. The international transactions undertaken by the assessee were separately reported in Form No.3CEB. The A.O. referred the determination of the arm's length price (ALP) of the international transactions to the Transfer Pricing Officer (TPO). In the instant appeal, we are concerned only with the international transaction of 'Service fees received' with a transacted value of Rs. 22,81,92,227/-. The assessee employed the Transactional Net Margin Method (TNMM) with the Profit Level Indicator (PLI) of Operating Profit to Operating Cost (OP/OC). The assessee computed its own ALP at 10%. Certain comparables were chosen, whose average PLI for the year under consideration was computed at 10.20%. It was on such basis that the assessee claimed its international transaction to be at ALP. The TPO did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,273/-, break-up of which has been given as per Schedule 11, as under:- INCOME FROM OPERATIONS Micro Enterprises Development 5,283,039 Skill Development 27,575,000 Entrepreneurship Development 10,873,397 Tourism & Research Studies 14,835,450 Project related Services, Infrastructure Planning & Development 32,600,996 Environment Management 3,998,796 Energy related Services 4,835,206 Cluster Development 47,986,516 Asset Reconstruction & Management Services 5,503,141 Emerging Areas 683,732 7. A careful perusal of the operations carried out by Apitco Limited reveals that this company is providing services in the nature of Project report preparation, Technical and economic studies, Feasibility studies, Micro enterprise development, Skill development, Project management consulting, Industrial cluster development, Environmental management consulting, Energy management consulting, Market and social research and Asset reconstruction management services. No segment-wise profitability data of these services is available. The TPO has considered this company as comparable on entity level. We find that there is a tiny resemblance of 'Market and social research' functions pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation with leading Indian Public Sector and Private Sector consultancy organisations on the basis of Public-private partnership model that offers collective Indian experience and expertise through the provision of a range of advisory services with particular focus on 'Procurement'. This company provides technical assistance in enhancing quality, transparency, efficiency and effectiveness of procurement and implementation service to help attain desired institutional and corporate objectives. The expertise of this company is available to various sectors including power, water resources, transportation, industries, etc. Its services have been outlined in the Annual report. From such services rendered by this company, it can be noticed that it is conducting Independent Procurement Review of multilaterally funded projects spread across the globe. It also undertakes Procurement audits. This company is providing full time advice on procurement and contract related aspects to several agencies across the globe. For example, in Georgia, it provided advice on procurement and contract related services to Municipal Development Fund (MDF), Republic of Georgia. In Iran, this company provided proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce shares, debenture instruments and bonds, commercial paper and private placements. It also undertakes transfer processing, customer/query handling and correspondence, split/consolidation/renewal of certificates, processing and distribution of interest/dividend warrants, payments by physical warrants/through ECS/Direct Credit. Under Records Management Activity, this company undertakes storage, retention & retrieval of physical and/or electronic records. Under Payroll and Trust Fund Activity, this company handles the activities normally handled by "Payroll and Retirement Funds" section in any organization, including interface with regulatory authorities. When we compare all the three broader activities undertaken by this company, namely, R&T, Records and Payroll, with the market services rendered by the assessee to its AE, on a cost plus basis, we find that there is a huge functional disparity between the two. That apart, the consideration of this company on an entity level by the TPO has rendered the entire exercise of comparison meaningless. Finding striking dissimilarities between this company and the assessee, we order to exclude this company from the final set of comparables. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowance of Rs. 1,97,09,254/- made by the Assessing Officer u/s 40(a)(i) of the Act. 20. Succinctly, the facts of this ground are that the assessee incurred certain expenses in foreign currency on various accounts. On perusal of the details filed by the assessee, the Assessing Officer observed that the assessee did not deduct tax at source from payments made to certain parties outside India. A list of such payments made by the assessee totaling Rs. 2.05 crore and odd has been set out on page 2 of the final assessment order. On being called upon to explain as to why no tax withholding was done, the assessee submitted that the services were rendered in Bangladesh/Italy/Nepal and the payees did not have any business connection in India. It was thus claimed that the amount was not chargeable to tax in India, thereby obliterating the requirement of deduction of tax at source. The assessee also submitted that some of the payments made were in the nature of reimbursement of expenses, again, not requiring any tax withholding. The Assessing Officer noticed in para 5.2 of the impugned order that the payments were made for alleged professional services/other services in Bangladesh/Nepal. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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