TMI Blog2018 (7) TMI 1727X X X X Extracts X X X X X X X X Extracts X X X X ..... sement and sale promotion expenses by the overseas group entity on cost plus basis. Under the circumstances, we do not find any infirmity in the order of me Ld. Commissioner of Income Tax (A) in holding that these expenses are revenue in nature. - ITA No. 5809/DEL/2014 And ITA No. 5479/DEL/2014 - - - Dated:- 27-7-2018 - SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND SHRI SUCHITRA KAMBLE, JUDICIAL MEMBER For The Assessee : Shri Piyush Gupta, CA Shri S.K. Agarwal, CA And Shri Arpan Khanna, CA For The Revenue : Shri Sanjay Kumar Yadav, Sr DR ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, These two cross appeals by the Revenue and the assessee are preferred against the order of the CIT(A) XX, New Delhi dated 31.07.2014 pertaining to assessment year 2009-10. Both these appeals were heard together and are disposed of by this common order for the sake of convenience and brevity. 2. Quarrel is in respect of exclusion of one comparable and inclusion of two comparables. The Revenue is in appeal for exclusion of the comparable and the assessee is in appeal for inclusion of comparables. 3. Representatives of both the sides were heard at length, case recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. Based on the above, the ALP of international transaction was computed as under: Arm's length mean margin 20.95 Operating Cost 166,125,429 Arms Length Margin 20.95% of the OC Arms Length Price (ALP) @120.95% of operating cost 200,928,706 Price received 183,478,661 Shortfall being adjustment u/s 92CA 17,450,045 8. The assessee strongly objected for inclusion of three comparables, namely, Vapi Waste Effluent Mgmt. Co. Ltd, Choksi Laboratories Ltd and Techprocess Solutions Limited. 9. Before the first appellate authority, it was strongly contended that all these three companies are functionally different from the assessee company and, therefore, they should not be considered as comparables for determination of ALP. 10. After considering the facts and submissions, the ld. CIT(A) was convinced that Techprocess Solutions Ltd is not a good comparable by holding as under: The Directors' Report reveals that Techprocess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he following: locating new business opportunities in the region under the right brand, building strong relationships with existing and prospective hotel owners; ensuring that the franchisee hotels are in compliance with the brand standards and suited to the local markets in which the individual hotels operate; implementing and maintaining brand standards with respect to hotel design and operations etc. Both the appellant company and Choksi Laboratories are rendering support services. Considering the facts of the case, I am of the view that the functions of Choksi Laboratories Limited are broadly similar to the functions carried out by the appellant Company. Accordingly, Choksi Laboratories Limited is retained in the final set of comparables. 12. As mentioned elsewhere, the Revenue is in appeal against the exclusion of Techprocess Solutions. We find that Techprocess Solutions Ltd use unique capabilities and proprietary tools and is engaged in providing payment processing and online transactions processing to customers in banking, mutual funds, telecom and other entities in banking, financial services and insurance. In our considered view, this company cannot be compared to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITAT in the cases of M/s MCI Com India P. Ltd. and M/s Verizon India P. Ltd. (supra) has held that companies like EIL, Rites, Wapsos and TCE are engineering companies and provide end to end solutions and therefore they cannot be compared with those assessee who were into providing marketing support services to the parent company. They were held to be functionally not comparable with these engineering companies. The case of Vapi also falls on the same footing. Therefore, respectfully following the order of the IT AT in the cases of M/s MCI Com India P. Ltd. and M/s Verizon India P. Ltd. (supra) and Estel in ITA no. 584/Bang/06 we are of the view that Vapi and WAPCOS are functionally not comparable to the assessee. 19. The order of the coordinate bench was affirmed by the Hon'ble Delhi High Court in Tax Appeal No. 952/2015 wherein the Hon'ble High Court has held as under: 6. As far as Issue (i) is concerned, the Court finds that while the Assessee provides marketing support services, the first excluded company WASCOS, as a comparably/ provides engineering consultancy services and the second excluded company Vapi provides consultancy for water resource management. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... boratories Ltd is not a good comparable and should be excluded from the final list of comparables. We, accordingly set aside the finding of the ld. CIT(A) and direct the TPO/Assessing Officer for exclusion of two companies, namely Vapi Waste Effluent Mgmt. Co. Ltd and Choksi Laboratories Ltd. 24. There are two more grounds in Revenue s appeal which relate to deletion of addition of ₹ 23,25,896/- on account of project and consultation fee and deletion of ₹ 68,27,880/- on account of advertisement and sales promotion. We find that the first appellate authority, while deleting these two additions, have followed the order of the Tribunal in assessee s own case for assessment year 2007-08. The relevant findings of the coordinate bench in ITA No. 3586/DEL/2012 read as under: 6. We have heard the rival contentions in light of the material produced and precedent relied upon. We find that in this case assessee business model is concerned of providing various support services to its parent company located in USA. The said Service Agreement clearly provides that assessee company would be reimbursed the expenditure incurred with the markup of 8%. In the course of rendering ..... X X X X Extracts X X X X X X X X Extracts X X X X
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