9911796707
TMI Blog2018 (2) TMI 1986X X X X Extracts X X X X X X X X Extracts X X X X ..... n upholding M/s. Confidence Shipping Co. as valid comparable. 4. The CIT(A) has erred in rejecting the alternative plea of the Appellant to take into consideration expenses of Rs. 63,878,901/- incurred by the appellants and collected back from their AE, in order to arrive at the manning fee charged by the Appellant." 3. As a perusal of the aforestated Grounds of appeal reveal, the sum and substance of the dispute is with regard to an addition of Rs. 6,82,61,138 made to the returned income on account of transfer pricing adjustment relating to the international transactions entered by the assessee with its overseas associated enterprise. In order to appreciate the controversy, the relevant facts can be summarised as follows. The appellant is a company incorporated under the provisions of the Companies Act, 1956, and is inter-alia, engaged in the business of sourcing, screening and selecting Indian seafarers and also providing assistance in completing their pre-joining formalities, etc. For the assessment year under consideration, it filed a return of income declaring a loss of Rs. 2,08,90,645, which was subject to a scrutiny assessment whereby the total income has been assessed at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... representative for the assessee pointed out that the said statement was wrong in as much as in its Transfer Pricing Study, the assessee had selected the Transactional Net Margin (TNM) method as the most appropriate method to compute the arm's length price. On this aspect, there is no rebuttal by the Learned DR, and therefore we proceed further by noticing that the assessee company had benchmarked the international transaction of providing manning services to its associate enterprise by selecting the TNM method as the most appropriate method. In order to complete the facts-narration, it may also be noted that before the TPO, assessee pointed out that its margin in the manning services segment was 24.03% and on comparison with the average margin of the comparables selected at 10.63%, the margin of the assessee was found to be favourable and thus the international transaction of providing Manning services to associate enterprise was at arm's length price. However, the TPO has given a go-by to the TNM method selected by the assessee and instead he has applied the Comparable Uncontrolled Price (CUP) method to benchmark the transactions. The relevant discussion in the order of TPO reveal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find appropriate to reproduce as under:- "xiv) The TPO/ITO have also ignored the fact that had the amounts of expenses billed on their principals and the amounts received from their principals by your appellants been considered by the said TPO/ITO properly, they would have observed the bare truth that the amount received/realised by your appellants from their principals was US$ 152.94 as against the US$ 150/- considered by the TPO/ITO, as set out hereunder:- TABLE Sl. No. Particulars Rupees Rupees 1 On Billed basis : Manning fee included in P&L A/c 21,697,822 Add : Exp. Incurred under current a/c 63,878,901 85,576,723 Add : Project exp. Incurred/billed 3,988,466 Total 89,565,189 No. of man months as per TPO 12,213 Therefore, charge per man month 7,334 Exchange rate as per TPO 48.80 Therefore, charge per man month in US$ as per BSMI 150.28 Charge per man month as per TPO in US$ 150.00 Excess received by BSMI in US$ 0.28 2 As per TPO/ITO: Manning fee as per TPO @ US$ 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it may, we have considered the said alternate plea of the assessee and find that the same is potent. The relevant details which we have extracted above, clearly suggest that assessee incurred expenses for providing manning services to the extent of Rs. 6,38,78,901 which were reimbursed by its associate enterprise. At the time of the hearing, our attention has also been drawn to the payments terms and conditions annexed to the Technical Management and Consultancy Agreement, which inter-alia, included clause 5 which reads as under:- "5. First Party shall provide free of cost following facilities to the personnel deputed by Second Party and for that purpose reimburse expenses incurred by the Second Party on behalf of First Party. a) Salaries and perquisites of personnel. b) Approriate lodging and boarding facilities. c) Local transportation for due performance of duties and personal use. d) To and fro air passage. e) Medical facilities." It has been clarified before us, that the reimbursement of the expenses of Rs. 6,38,78,901 is governed by above clause 5 of the arrangement with the associated enterprise. Notably, the TPO in page 10 of his order has reproduced the detai ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
