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2019 (7) TMI 296

..... ities in finance/accounts related services such as invoicing, refunds processing and other services such as ticketing, reservations etc. - Thus companies thus companies functionally dissimilar with that of assessee need to be deselected from final list. Working capital adjustment from PLI of comparable entity in terms of Rule 10B(3) - HELD THAT:- The Ld. DRP has denied the same by observing that no working capital adjustment was made by the assessee in its TP study report and secondly, it was observed that fees for services is not impacted in the same manner by credit period offered or received as is the case with sale of goods. Although Ld. AR has pleaded for this adjustment on the strength of certain judicial pronouncements, however, no convincing case has been made out before us so as to justify the grant of aforesaid adjustment. This ground stands dismissed. Transfer pricing adjustment of the book profits u/s 115JB - HELD THAT:- We direct lower authorities to exclude Transfer Pricing adjustment, if any, while computing Book Profits u/s 115JB. Accordingly, this ground stands allowed. SEE OWENS CORNING (INDIA) P. LTD. VERSUS DCIT CIR 7 (1) , MUMBAI [2016 (5) TMI 1098 - ITAT MUMBA .....

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..... Associated Enterprises (AE) and as reported in Form No.3CEB were referred u/s.92CA (1) for determination of Arm s Length Price [ALP] to Ld. Transfer Pricing Officer-2(2)(1), Mumbai [TPO]. 2.3 It transpired that the assessee provided back office support services in the nature of IT enabled services and operated in single segment i.e. travel support services. These services were rendered to several constituents of Griffin Group which were mainly engaged in travel / travel related business worldwide over a large geographical spread. The assessee earned revenue of ₹ 16.95 Crores by rendering these services. In its TP study report, the assessee classified itself as back office support provider and benchmarked the transaction using transactional net margin method [TNMM] as the most appropriate method. The Profit Level Indicator [PLI] was taken as Operating Profit / Operating Cost. The assessee computed its own PLI at 13.78% as against mean margin of 9.39% reflected by 7 comparable entities and the same being within tolerance range of +5%, no Transfer Pricing [TP] adjustment was proposed by the assessee. 2.4 However, the assessee s methodology was not termed as reliable and correct .....

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..... re not part of the core business of the Griffin Group. Merely because the functional profile of the comparable entity falls under the category of ITeS services, the same would not make these entities comparable to assessee as held by Mumbai Tribunal (Special Bench) in Maersk Global Centers (India) Pvt. Ltd. V/s ACIT [2014 43 Taxmann.com 100], Hon ble Bombay High Court in CIT V/s Aptara Technology Pvt. Ltd. [2018 92 Taxmann.com 240] & Hon ble Delhi High Court in Rampgreen Solutions Pvt. Ltd. V/s CIT [2015 60 Taxmann.com 355]. 4.2 In the above background, Ld. AR argued for exclusion of 4 entities namely (i) Accentia Technologies Ltd. (ii) Universal Print Systems Ltd. (iii) BNR Udyog Ltd. (iv) Excel Infoways Ltd. by submitting that these entities were functionally not comparable to low-end ITeS services being provided by the assessee. To support the same, reliance has been placed on various judicial pronouncements for same assessment years, the copies of which has been placed on record. The Ld. DR submitted that final set of comparable entities would not require any interference. 5. We have carefully considered the rival submissions and perused relevant material on record includin .....

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..... ther point to which our attention is drawn is the fact that this entity has unallocated expenses of ₹ 89.67 Lacs which would distort the segmental profits and therefore, the segmental results would not be reliable. Upon perusal, we find that Bangalore Tribunal in the case of XLHealth Corporation India (P.) Ltd. vs. ACIT [2018 91 taxmann.com 310] for very same AY 2012-13 directed for exclusion of this entity in case of assessee having similar functional profile on the ground that an entity which is engaged in the business of printing could be, by no structure of imagination, be considered as comparable entity. Secondly, as rightly pointed out by Ld. AR, the segmental results of the said entity would not be reliable in view of the fact that it has unallocated expenditure of ₹ 89.67 Lacs which would surely distort the segmental results. Keeping in view the said factors, we direct for exclusion of this entity. (iii) BNR Udyog Ltd. Similar arguments of functional dissimilarity have been raised for this entity by drawing our attention to the fact that this entity was engaged in medical transcription, medical coding and medical billing etc. As observed by us in the case of Acc .....

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..... ugh Ld. AR has pleaded for this adjustment on the strength of certain judicial pronouncements, however, no convincing case has been made out before us so as to justify the grant of aforesaid adjustment. Therefore, we are not inclined to interfere in the order of lower authorities, in this regard. This ground stands dismissed. 7. In Ground No. 3.1, the assessee is seeking benefit of tolerance range of +5%. In this regard, it would suffice to direct Ld. TPO / Ld. AO to grant the applicable benefits / concessions as per law. This ground stands allowed for statistical purposes. 8.1 In Ground No. 4.1, the assessee is aggrieved by the fact that impugned TP adjustment has also been added back while computing Book Profits u/s 115JB. We find that this ground was not raised by the assessee before Ld. DRP. The assessee seeks adjudication of the same by relying upon the decision of Hon ble Supreme Court in NTPC V/s CIT [229 ITR 383] in view of the fact that this is purely a legal ground. It has been submitted that this issue stood covered in assessee s favor by the decision of this Tribunal rendered in Owens Corning (India) Pvt. Ltd. V/s DCIT [ITA No. 8522/Mum/2011] & Cash Edge (India) Pvt .....

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..... n is challenge raised by the assessee to the action of the AO in adding back transfer pricing adjustment of ₹ 1,18,93,468/- to income assessed under Section 115JB (MAT). 34. In this regard, the learned counsel for the assessee submitted that the AO has added the transfer pricing adjustment of ₹ 1,18,93,468/- to the book profits of the Assessee under Section 115JB of the Act without appreciating that book profits of the company cannot be adjusted except as provided in Explanation 1 Section 115JB(2) of the Act and that transfer pricing adjustment is not one of the adjustments contemplated under that Explanation. He placed reliance upon the following decisions to contend that except for adjustments provided in Explanation 1 Section 115JB(2) of the Act, no other adjustment can be made to book profits under Section 115JB of the Act :- i. Apollo Tyres: 255 ITR 273(SC) ii. Malayalam Manorma: 300 ITR 251(SC), iii. HCL Comnet Systems and Services Ltd., 305 ITR 409 (SC) and iv. DCIT v. Bisleri Sales Ltd.: 151 TTJ 285 (Mum)(ITAT) 35. The Ld. Sr. DR on the other hand supported the order of the AO on the strength of the decision of the Special Bench of the Tribunal in the case of Ra .....

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