TMI Blog2020 (10) TMI 664X X X X Extracts X X X X X X X X Extracts X X X X ..... by both the companies, we direct the inclusion of Specturm Business Solution Ltd. in the final list of comparables. - ITA No.4035/Del/2016 - - - Dated:- 14-10-2020 - Ms. Sushma Chowla, VP And Shri Prashant Maharishi, AM For the Appellant : Sh. Atul Jain, CA For the Respondent : Sh. M.Barnwal, Sr.DR ORDER PER SUSHMA CHOWLA,VP The present appeal filed by assessee is against order of CIT(A)-1, Gurgaon dated 29.03.2016 relating to assessment year 2010-11 against the order passed under section 143(3) r.w.s 144C of the Income-tax Act, 1961 (in short the Act ). 2. The assessee has raised following grounds of appeal:- 1. On the facts and circumstances of the case and in law, the Hon'ble Commissioner of Income Tax (Appeals) - 1 ( Hon'ble CIT(A) ) has erred in confirming the addition to the extent of INR 1,30,45,059 to the taxable income of the Appellant on account of adjustment to the Arm's Length Price ('ALP') of the Appellant's international transaction of provision of ancillary management support services with its Associated Enterprises ( AEs ). 2. On facts and circumstances of the case and in law, the Hon'ble ClT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 234B of the Act on the assessed income. 9. On the facts and circumstances of the case and in law, the AO has further erred in initiating penalty proceedings u/s 271(1)(c) mechanically and without recording any adequate satisfaction for this initiation even when no such penalty is warranted in the present case. All the above grounds are without prejudice to each other. 3. The issue raised in the present appeal is against the benchmarking of international transaction of provision of Ancillary Management Support Services by providing marketing support services to the Associated Enterprises (in short AE ). 4. Briefly in the facts of the case the assessee was an Indian company and was part of Intercontinental Hotels Group (in short IHG ), incorporated for managing and offering services mainly to the M/s. IHG. The assessee provided Ancillary Management Support Services to M/s. Continent Hotels INC. The Assessing Officer noted that the assessee had entered into several international transactions with its AEs and reference was made u/s 92CA(1) of the Act to benchmark the Arm's Length Price of the international transaction undertaken by the assessee. The TPO has t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r and thereafter, final assessment order making the aforesaid adjustment, against which the assessee filed an appeal before the CIT(A). The adjustment on account of Provision of Ancillary Management Support Services was upheld in the hands of the assessee. However, adjustment made on account of outstanding receivable was deleted by the CIT(A). The appeal of the Revenue on this ground has been dismissed on the ground of low tax effect. 6. The assessee is in appeal against the adjustment made on account of Provision of Ancillary Management Support Services. 7. The Ld.AR for the assessee has objected to the inclusion of comparables which were introduced by the TPO i.e. (a) Apitco Ltd.; (b) Global Procurement Consultants Ltd.; and (c) TSR Darashaw Ltd. The assessee is also aggrieved by the rejection of the comparable i.e. Spectrum Business Solutions Ltd. (in short SBSL ). Another aspect which is raised by the Ld.AR for the assessee before us is that SBSL was rejected by the TPO on arbitrary basis even though the company is functionally comparable to the assessee. The assessee is also aggrieved by erroneous computation of margin in case of HSCC (India) Ltd. at 18.32%. We shall de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.94 Average 21.66% 10. The assessee is aggrieved by the inclusion of Apitco Ltd., Global Procurement Consultants Ltd. and TSR Darashaw Ltd. and rejection of Spectrum Business Solution Ltd. The assessee is also aggrieved by the computation of margins in the case of HSCC (India) Ltd. 11. Coming to the concern Apitco Ltd. The assessee points out that it is Government Company set up by the Government for specific government purposes, where majority revenues were from government related entities; hence functionally not comparable. Also it was engaged in diversified high-end technical services and no segmental information is available. The Ld.AR for the assessee pointed out that similarly GPCL is funded by the Government i.e. EXIM bank and World Bank and involved in rendering services only to Government companies and functionally not comparable as involved in procurement and varied non-comparable high end services. In respect of TSR Darashaw Ltd. the same is functionally not comparable as it acts as Depository and Share Registrar. The assessee before us is a BPO and functional profile of the assessee has been accepted b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wo concerns i.e. Apitco Ltd. and GPCL on the ground that Government companies are not comparable to business concerns. We find that the issue stands settled by the decision of the Hon ble Delhi High Court in Philip Morris (supra) wherein vide paras 13 to 16 it was held as under:- 13. As could be seen from the annual report of this company, is company is one of the 18 TCOs was formed by the key national level financial institutions in association with state-level institutions and banks, and accordingly being a government enterprise Apitco Ltd., was established to provide technical services to other government companies and body corporate. Further this company is engaged in providing services such as asset reconstruction and management, clustered allotment for mega footmarks, and environment services, energy- related services, infrastructure planning and development, energy audit etc. and undoubtedly this company is a high-end consultancy service provider. The annual report further reveals that this company is engaged in providing high-end technical services also. 14. Ld. AR brought to our notice that they Apitco Ltd., was rejected by a catena of decisions rendered by diffe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that M/s. Apitco Ltd. was not good comparable of concerns providing business support services, on the ground that in case of Government enterprises, profit motive is not relevant consideration and the Government company worked for public undertakings. 17. Further, GPCL has been held to be not comparables by the Hon ble Delhi High Court in Philips Morris (supra) itself on the ground that the company was established by the Government to provide Ancillary Management Support Services to Government Departments or their agencies. The relevant paras read as under:- 26. We have gone through the material provided in the paper book in respect of Global Procurement Consultants Ltd. and find that Global Procurement Consultants Ltd., is primarily engaged in preparing and reviewing technical specifications, estimation of castes, selection of vendors, inspection and a expediting and quality control and time management. It is also clear that the company renders the procurement related services in exclusively in CIS countries, Eastern Europe and emerging economies in the African continent, by Kettering relates in the areas like Health, Education, Urban and Rural Development, agriculture, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s AEs. 18. The assessee before us is also engaged in providing marketing and Ancillary Management Support Services to its AE; hence the concerns, Apitco Ltd. GPCL being Government concerns are not comparable and the same needs to be excluded from the final list of comparables. In this regard, we find support from the ratio laid down by the Hon ble Delhi High Court in Philips Morris (supra) and Tribunal in assessee s own case relating to Assessment Year 2009-10 wherein another Government concern i.e. Vapi Waste Effluent Co. was held to be not comparable to the assessee. Accordingly, we direct so. 19. The next concern which the Ld.AR for the assessee claims is not comparable is TSR Darashaw Ltd. on the ground that the same operates in three segments i.e. Registrar and Transfer Agent Activity, Record management and Payroll and Trust Fund Activity Payroll, which functions are not similar to the Marketing and Ancillary Management Support Services provided by assessee to its AE. The case of the assessee is the concern, which acts as depository and share registrar cannot be held to be functionally comparable to the assessee. Our attention was drawn to the Annual Report, wherein ..... X X X X Extracts X X X X X X X X Extracts X X X X
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