TMI Blog2019 (5) TMI 1741X X X X Extracts X X X X X X X X Extracts X X X X ..... aganesh, AM Assessee by: Shri M.P. Lohia Revenue by: Shri Chaitanya Anjaria ORDER M. Balaganesh (A.M): This appeal in ITA No.2162/Mum/2018 for A.Y.2010-11 arises out of the order by the Dispute Resolution Panel-IV, Mumbai in Objection No.153 dated 19/12/2014 (ld. DRP in short) against the order of assessment passed u/s.143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 30/01/2015 by the ld. Asst. Commissioner of Income Tax-14(1)(2), Mumbai (hereinafter referred to as ld. AO). 2. The ground Nos. 1 2 raised by the assessee are general in nature and do not require any specific adjudication. 2.1. During the course of hearing, the ld. AR stated that grounds No.3 to 5 raised by the assessee are not pressed by him. The same is reckoned as a statement made from the Bar and hence the same are dismissed as not pressed. 2.2. Ground No.6 raised by the assessee is with regard to the action of the ld. DRP upholding the action of ld. TPO by considering certain additional comparables which are functionally different with that of the assessee for the purpose of benchmarking the international transactions of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived from APLL Singapore and API CPL ..Singapore against sale of investment 761,888,994 Valuation report 6 Payment for business administration services to APLL Singapore 4,760,500 TNMM Total 1,492,624,288 1) These recoveries do not include provision of services and the actual cost incurred is receivable from the AE. Based thereon, the amount received/receivable is at arm's length. 2) These amounts are collected by the assessee on behalf of the AEs. Based thereon, the amount paid I payable is at arm's length. 3) These amounts are collected by the AEs on behalf of the assessee. Based thereon, the amount received/receivable is at arm's length. 3.1. The assessee is responsible for local logistics and freight forwarding support services in India (such as origination services for shipments originated in India to deliver outside India and destined services for shipments originated outside India to deliver in India). Similarly other associated enterprises of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - Sr. No. Nature of international Transaction Value of Transaction (Rs.) 2 Freight charges in respect of international freight forwarding shipments paid by the Assessee in India on behalf of APLL Singapore 185,182,967 3 Charges in respect of international freight forwarding shipments collected by the Assessee from the shippers {exporter}/ consignees (importer) in India on behalf of AEs 281,630,514 4 Charges in respect of international freight forwarding shipments collected by AEs from consignees (importer) / shippers (exporter) outside India on behalf of the Assessee 143,479,830 3.3. The assessee explained before the ld. TPO that in the agreement entered into with AE, pass through cost has been defined as under:- Pass Through Cost means payments made for the account of other parties, example of Pass Through Costs are terminal handle costs (THC), insurance costs, import duties, freight (in/out) and any costs that would be classified under gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties. Any benefit arising to the assessee or its AEs is purely incidental and the cost of such benefit, if any, would not be significant. In view of the same and having regard to the fact that the transactions were undertaken on a cost to cost basis, these international transactions in the nature of administrative conveniences should not require a separate analysis and is considered to be consistent with the arm's length standard. 3.7. In the transfer pricing study of assessee submitted vide letter dated 22 August 2013, it was submitted that APLL India's is compensated for local logistics and freight forwarding support services with mark-up of five percent on the costs incurred in delivering the services. The revenue in excess of costs plus an arm's length mark-up of five percent, if any, is remitted to APLL Singapore as a network fee for its role as the principal and entrepreneurial risk taker and its leadership relating to the strategic planning and management of the Global Logistics Business and provision of certain centralized services in the structure. Further, it was submitted that the network fee is not a payment made by APLL India for use of any patent, trad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of 12 comparables, the assessee submitted that its pricing is at arm s length. 3.11. The ld. TPO observed in his order that the assessee has collected total revenue of ₹ 57.07 Crores, out of which the operating cost of the assessee is ₹ 43.34 crores. The remaining profit which is to be shared between the assessee and the AE is ₹ 13.73 cores, out of which ₹ 2.18 crores is retained by the assessee, which comes to 15.73%. An amount of ₹ 11.56 crores is retained by the AE which is 84.17% of the total revenue as shown below:- Particulars Amount (Rs.) Total revenue (from IFS and consolidation business) without pass through cost A 57,07,88,484 Operating costs (i.e. base cost as defined in the IPS and Consolidation service agreement) B 43,34,35,239 Add: Mark-up of 5% C 2.16,71.762 D=B+C 45,51,07,001 Network Fee A~D 11,56,81, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7,38,11,639 Adjustment 4,18,69,844 3.14. The ld. DRP granted partial relief to the assessee with regard to inclusion / exclusion of certain comparables. The ld. AO/TPO arrived at the revised adjustment figure to ALP at ₹ 3,39,81,323/-. 4. Aggrieved, the assessee is in appeal before us. 5. We have heard rival submissions. We find that assessee had challenged the following four comparables out of 5 comparables chosen by the ld. TPO:- i. TSR Darashaw Ltd., ii. Aptico Ltd., iii. Global Procurement Consultants Ltd., v. HCCA Business Services Pvt. Ltd., Let us now examine each and every comparable as under:- 5.1. TSR Darashaw Ltd. The assessee seeks to exclude this comparable. The ld. TPO from the annual report of this comparable company observed that the said company is involved in the provision of business process outsourcing services like payroll and employees trust fund administration and management, record management; registrar and transfer agents for equity and preference shares, debenture instruments and bonds, commercial paper and private pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ITES services and that ITES services could not be compared with logistic support services. The ld. AR also placed on record the order passed by the ld. DRP in assessee s own case on 15/05/2018 for A.Y.2014-15 wherein, in the context of inclusion of comparable i.e., Tata Consultancy Engineering Ltd., (TCE in short) by the ld. TPO, the ld. DRP held that the said comparable is found to be operating in the area of engineering consultancy and not in the area of support services and therefore, the same cannot be selected as an appropriate comparable to the assessee. 5.1.3. The ld. AR also drew our attention the very same order of ld. DRP dated 15/05/2018 wherein, in the context of inclusion of one of the comparables i.e., Holtec Consulting Pvt. Ltd., (Holtec in short) by the ld. TPO, the ld. DRP held that the said company is found to be operating in the area of engineering consulting and not in the area of support services and therefore, the same cannot be selected as an appropriate comparable to the assessee company. 5.1.4. The ld. DR relied on the DRP observations for the year under consideration with regard to this comparable and did not advance any further argument. There i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any from the final set of comparables. 5.1.5. We also find that against this decision, the revenue had preferred an appeal to Hon ble Delhi High Court which was dismissed on the ground that no substantial question of law arises thereon requiring examination by the court vide order dated 26/07/2016 in ITA No.447/2016. 5.1.6. We find that this comparable of M/s. TSR Darashaw Limited had been sought to be excluded from the final list of comparables by the Coordinate Bench decision of Delhi Tribunal in the case of M/s.Gecas Services India Pvt. Ltd., vs. ITO in C.O. No.217/Del/2015 dated 18/10/2018 for A.Y.2010-11 wherein the facts are as under:- 2.During the year under consideration, the assessee company was engaged in the business of providing marketing support services to its group affiliates and particularly GECAS services Limited, Ireland. The assessee had undertaken following international transactions with its Associated Enterprises (AE) S.No. International Transactions Value in transactions 1 Market support and administrative services rendered ₹ 4,57,43 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in undisputed before us and in the light of the functions performed by TSR Darashaw Limited (i.e., comparable chosen by the ld. TPO) and further in the light of the aforesaid judicial precedents, we hold that the comparable TSR Darashaw Limited cannot be treated as a good comparable with the assessee in view of the functional dissimilarities. The ld. TPO accordingly is directed to exclude the same from the list of final comparables. 5.2. Apitco Limited The assessee sought for exclusion of this comparable from the list of final comparables chosen by the ld. TPO. The ld. TPO observed that as per the information downloaded from the website of the said comparable, the said company is involved in the provision of consulting services, especially to SMEs in project identification, project counselling, pre-feasibility reports, detailed project feasibility studied, infrastructure planning, market assessment, expansion, diversification and turnaround strategies energy audits, waste minimization, environment impact assessment, valuation of fixed assets, skill development etc, which is akin to services provided by assessee. 5.2.1. We find that the ld. TPO on perusal of break-up o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of social obligations etc. Thus, it is not comparable. Moreover, from the annual report, it is clear that the revenue earned in executing turnkey project for other public sector undertakings was much more than the filter of 25%, which has been applied by the TPO in his order under Section 92CA(3) of the Act, while taking TRF Ltd. as a comparable on the ground that its related party transaction was not in excess of 25% of its total turnover. Thus, applying consistent filter of 25% or less of related party transaction alone to be considered comparable, Engineers India Ltd. could not be considered to be comparable. (b) We find that the view taken by the Tribunal in the impugned order is a reasonable and possible view. Nothing has been shown which would justify our interference in the impugned order of the Tribunal excluding Engineers India Ltd. from the list of comparables. (c) In the above view, question (b) as framed also does not give rise to any substantial question of law. Thus, not entertained . 5.2.4. We also find that the Hon ble Delhi High Court in the case of PCIT vs. International SOS Services India Pvt. Ltd., in ITA No.454 of 2016 dated 30/05/2017 in the contex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the ld. DRP with regard to this comparable. Hence, following the directions of DRP in assessee s own case in the A.Y.2013-14, we direct the ld. AO to remove this comparable from the list of comparables. 5.5. The ld. TPO is directed to re-compute the ALP of the assessee after excluding the aforesaid four comparables and arrive at the revised margin of the comparables and decide as to whether ALP adjustment, if any, need to be made thereafter, in the case of the assessee. Accordingly, Ground No.6, 20,21,22 23 are allowed. 6. Ground No.7 to 9 raised by the assessee are only with regard to the adoption of correct margins of the aforesaid comparables which we direct the ld. TPO to verify while recomputing revised ALP in the light of the aforesaid directions given by us. 7. Ground No.10 raised by the assessee is only academic and does not require any specific adjudication. 8. Ground No. 11 12 were stated to be not pressed by the ld. AR before us. The same is reckoned as a statement made from the Bar. Accordingly, the same are dismissed as not pressed. 9. Ground No.13 raised by the assessee is with regard to short credit of tax deducted at source, which is hereby ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
