TMI Blog2018 (12) TMI 1853X X X X Extracts X X X X X X X X Extracts X X X X ..... iz (i) Cyber Media Research Ltd; and (ii) ICRA Online Ltd. by the TPO for benchmarking the ALP of the international transactions of the assessee with its AEs during the year under consideration not being justified, thus cannot be sustained and is liable to be vacated. We direct the AO/TPO to re-workout the ALP in the hands of the assessee after including the aforementioned companies i.e. (i) Cyber Media Research Ltd; and (ii) ICRA Online Ltd. as comparables in the final list of comparables. In case, the claim of the assessee that after including the aforementioned companies its ALP would fall within the range of is found to be in order then no adjustment to the ALP would be called for in the hands of the assessee. Unexplained credit - Difference between the closing stock‟ and opening stock -A submitted by the assessee before the DRP that the difference in the valuation of stock had arisen only due to software system while preparing the stock statement as per the format that was required during the course of the assessment proceedings - HELD THAT:- In the course of proceedings before the DRP, it was claim of the assessee that the variance in the valuation of stock was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 57,7107- in respect of Appellant's impugned international transaction of provision of business facilitation services to its associated enterprises ('AE') and in doing so, the Ld. AO/ TPO grossly erred in - 2.1. rejecting the following nine companies in the Appellant's comparable company set which are functionally comparable to Appellant's Business Facilitation Services segment: i. AOK In-House BPO Services Ltd. ii. Caliber Point Business Solutions Ltd. iii. Cyber Media Research Ltd. iv. ICRA Online Ltd. v. Jindal Intellicom Ltd. vi. M C S Ltd. vii. P L Worldways Ltd. viii. Pipal Research Analytics and Information Services India Private Ltd. ix. Sparsh BPO Services Ltd. 2.2. not considering the infrastructure cost re-imbursements received by the Appellant from its AEs as operating revenues and thereby erred in computing OP/OC margin of Appellant's Business Facilitation Services segment at 10.01% instead of 19.41% as worked out by Appellant. Ground No. 3: 3. The Ld. AO / Ld. TPO [pursuant to non-adjudication by the DRP in its order under section 144C(5) of the Act] grossly erred, in law and in facts, in - 3.1. not allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... servicesreceipt 177,580,287 TNMM 4 Reimbursement of infrastructure cost receipt 15,171,875 TNMM 3. It was noticed by the TPO that the assessee had benchmarked the international transactions of provision of business facilitation services to its AEs using Transaction Net Margin Method (for short TNMM ). The assessee company was selected as a tested party. The ALP was determined by the assessee using Prowess database and fourteen companies were selected as comparables. The arithmetic mean Operating Profit ( OP )/Operating Cost ( OC ) margin of the comparable companies worked out at 10.56% vis-a-vis the OP/OC margin of the assessee‟s business facilitation service segment of 19.41%. The TPO rejected 13 comparables on the ground that their functional profiles were different from that of the assessee. One of the comparable viz M/s Genins India Insurance TPA Ltd. was however accepted by the TPO. The TPO further selected certain fresh comparables and came up with a final set up of comparables, as under:- S. No. Name of the comparable C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be considered as operating income as the same was reimbursement against fixed assets, therefore, upheld the TPO s action in excluding the same while calculating the operating margin of the assessee. (ii) The DRP after deliberating upon the functional profiles of the comparables selected by the TPO, therein excluded five comparables viz (i). Empire Industries Ltd.; (ii). HSCC (India) Ltd.; (iii). HCCA Business Service Pvt. Ltd.; (iv). ICRA Management Consulting Service Ltd.; and (v). India Cement Capital Ltd. Further, the DRP after considering the comparables which were selected by the assessee but were rejected by the TPO, accepted four of such comparables as being functionally similar. On the basis of his aforesaid deliberations the DRP arrived at a final list of comparables as under:- Sr. No. Name Margin 1 Aditya Birla Insurance Brokers Ltd. 16.98% 2 Almondz Insurance Brokers Pvt. Ltd. 21.79% 3 Bajaj Capital Insurance Broking Ltd. 14.15% 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormerly IDC(India)Ltd.]; and (ii) ICRA Online Ltd. was set-aside, then its ALP would fall within the parameter of and no adjustment would be called for in its hands. The Ld. A.R took us through the observations of the TPO along with the reasons assigned by him for rejecting the aforementioned two comparables which were selected by the assessee for benchmarking its international transactions in the TPSR report. It was submitted by the Ld. A.R that both of the aforementioned comparables viz (i) Cyber Media Research Ltd.; (ii) ICRA Online Ltd. had wrongly been excluded by the TPO from the final list of the comparables on the ground that they were functionally different from the assessee. The Ld. AR in order to buttress his aforesaid contention took us through the functional profile of the assessee at Page 4 of the order passed by the TPO. The Ld. A.R submitted that both of the aforementioned parties viz (i) Cyber Media Research Ltd.; and (ii) ICRA Online Ltd. had been accepted by the TPO as a comparable in the immediate last two preceding years i.e. A.Ys 2009-10 and 2010-11. The Ld. D.R in order to fortify his aforesaid contention took us through the order of the TPO for A.Y 2010-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cost from the operating income of the assessee. Further, it was averred by the Ld. D.R that the DRP had rightly restricted the inclusion of only those parties as comparables in the final list, which were functionally similar to the assessee. The Ld. D.R relied on the orders of the lower authorities. 11. We have heard the authorised representatives of both the parties, perused the orders of the lower authorities and the material available on record. We shall first advert to the adjustment of ₹ 93,57,710/- made by the A.O towards the ALP of the international transactions of the assessee. We shall first focus on the contention of the Ld. A.R that in case the exclusion of two comparables which were selected by the assessee viz (i) Cyber Media Research Ltd; and (ii) ICRA Online Ltd. is set-aside, then its ALP would fall within and no adjustment would be called for in its hands. We have perused the functional profile of the assessee and that of the aforementioned comparables viz (i) Cyber Media Research Ltd; and (ii) ICRA Online Ltd. Insofar Cyber Media Research Ltd. is concerned, it is the claim of the assessee that the company offers research-based insights and consulting se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ementioned comparables or that of the assessee company had witnessed a change during the year under consideration as against that of the aforementioned preceding years, which would have justified the rejection of the said companies as comparables for the year under consideration. We are of the considered view that in the absence of any change in the circumstances a company which has been accepted as a good comparable by the revenue in the earlier years cannot be whimsically rejected in a subsequent year. Our aforesaid view is fortified by the judgment of the Hon ble High Court of Bombay in the case of Pr. CIT -1 vs Aptara Technology Pvt. Ltd. (ITA No.1209 of 2015), order dated 26/03/2018, wherein it was observed as under:- 5. Re. Question No. (C): (a) The impugned order of the Tribunal included Pentamedia Graphics Ltd. as comparable. This, after rendering finding of fact that for earlier Assessment Year 2007- 08 on identical fact situation when expenditure on account of multimedia development and web casting was incurred by it, M/s. Pentamedia Graphics Ltd. was included by the TPO as a comparable to arrive at ALP of the transaction entered into by the Respondent with its AE. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in treating the same as an unexplained credit in the hands of the assessee. It was observed by the A.O that on perusal of the details filed by the assessee as regards the valuation of stock, it was noticed that there was perceptible difference in the valuation of the closing stock‟ as against that of the opening stock‟ and the purchase price of the goods. It was noticed by the A.O that on a perusal of the details filed by the assessee, it emerged that in respect of certain commodities the average price of the commodities in the closing stock‟ was lower as against the purchase price during the year as well as its valuation in the opening stock‟. Observing that the accounting standard‟ laid down by the ICAI required that the closing stock‟ needs to be valued at lower of the cost or the market price, the A.O directed the assessee to produce the stock details in a specified format which contained in detail the opening valuation, purchase price and closing value of each commodity that was used by the assessee company for manufacturing and trading purpose. On verification of details furnished by the assessee, it was observed by the A.O that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per the format that was required during the course of the assessment proceedings. The Ld. A.R had submitted before us that the variance in the valuation of stock was on account of loss of stock. We are unable to persuade ourselves to subscribe to the aforesaid contention of the Ld. A.R. In the course of proceedings before the DRP, it was claim of the assessee that the variance in the valuation of stock was on account of the software system while preparing the statement of stock in the format as was required during the assessment proceedings. However, in sharp contradiction of its earlier stand, it is now submitted before us that the said variance had arisen on account of loss of stock. Be that as it may, in the absence of any plausible explanation as regards the difference of ₹ 3,53,550/- in the valuation of the stock, we find no reason to dislodge the observations of the lower authorities that the assessee had failed to reconcile the variance in the stock. However, we find ourselves to be in agreement with the contention of the Ld. A.R that in case the explanation of the assessee as regards the discrepancy in stock of ₹ 3,53,550/- was not to be accepted, then the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
