TMI Blog2021 (1) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... and considering the argument of the assessee that it would be well within the +/-5% tolerance range after inclusion of Icra Online Ltd., in the final list of comparables, we direct the ld. TPO to include the same in the final list of comparables and in view of this decision, the adjudication of other grounds would become academic and infructuous. Hence, no opinion is given hereunder in respect of other grounds raised by the assessee and they are left open. Accordingly, the grounds raised by the assessee are allowed. - ITA No.1689/Mum/2017 - - - Dated:- 30-12-2020 - Shri M. Balaganesh, AM And Shri Ram Lal Negi, JM For the Assessee : Shri Madhur Agarwal For the Revenue : Shri Shreenivasaraghava Iyengar ORDER PER M. BALAGANESH (A.M): This appeal in ITA No.1689/Mum/2017 for A.Y.2012-13 preferred by the order against the final assessment order passed by the Assessing Officer dated 31/01/2017 u/s.143(3) r.w.s.144C(13) of the Income Tax Act, hereinafter referred to as Act, pursuant to the directions of the ld. Dispute Resolution Panel (DRP in short) u/s.144C(5) of the Act dated 25/11/2016 for the A.Y.2012-13. 2. The assessee has raised the following groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred in adding 'Killick Agencies and Marketing Ltd as comparable company treating it as functionally comparable to the business facilitation service segment of the Appellant. 2.5 The Ld. AO / Ld. TP.O grossly erred in not considering the infrastructure cost reimbursement received by the Appellant as Operating Revenue and thereby grossly erred in computing OP/OC margin of the Business Facilitation Service segment of the Appellant at 11.67 percent instead of 15.27 percent as worked out by the Appellant. 2.6 The Ld. AO / Ld. TPO grossly erred in not allowing working capital adjustment whereas such comparability adjustment is appropriate and necessary while applying the Transactional Net Margin Method (TIMMM') to eliminate material differences in working capital deployed by the Appellant vis-a-vis comparables and is also permitted by law. 2.7 The Ld. AO / Ld. TPO grossly erred in not allowing the comparability adjustment for material difference in risk profile and functional profile of the Appellant vis-a-vis the comparable companies when such comparability adjustments are mandated by law. The Ld. AO grossly erred in initiating penalty proceedings unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. Business facilitation services receipt 180,865,010 2. Purchase of finished products for resale-payment 66,139,723 3. Purchase of raw materials for manufacture of finished products payment 43,924,505 4. Reimbursement of infrastructure cost receipt 5,827,628 5. Subscription of equity share capital 50,000,000 4.1. What is relevant to be discussed here is only with regard to business facilitation services provided to the AE by the assessee and whether the same was transacted at arm s length price. It would be relevant to describe the nature of service provided herein:- The assessee acts as captive business facilitation services centre for the following AEs within the LyondellBasell Group (a) Basell Polyolefin GmbH, Germany (b) Basell Asia Pacific Limited, Hong Kong and (c) Basell International Trading FZE, UAE and provides business facilitation services (including supply of manpower, marketing and promotion of polyo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 16,19,66,056 Operating Profit (C-(A)-(B) 1,88,98,954 Return on Total Cost (C)/(B) 11.67% 4.5. The ld. TPO took the final comparable companies as under and arrived at the arithmetic mean margin of 18.61% which was compared with assessee s margin of 11.67%. Sr. No. Name of the Company PLI as per Assessee(%) 1. Spectrum Business Solutions Ltd., 7.57 2. Genius India TPA Ltd., 23.78 3. Killick Agencies and Marketing Ltd., 9.03 4. IIT Insurance Broking Risk Mgmt. Pvt. Ltd., 26.78 5. Mahindra Insurance Brokers Ltd., 61.91 6. Tata Motors Insurance Broking Advisory Services Ltd., 6.96 7. Aditya Birla Insurance Brokers Ltd., 32.57 8. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itigating environment. The comparable selected by it are full fledged entrepreneur service provider plus operating in open market and also undertaking selling and marketing activities. We find that the assessee had pleaded before the ld. DRP that there are material differences in the risk and functional profile of assessee s business facilitation service segment vis- -vis the comparables selected by the assessee itself, which necessitates comparability adjustments favourable to the assessee. 4.9. We also find that the assessee in para 5.7 of the TP study report had reserved its right to apply the following comparability adjustments i.e. a) for differential risk profile b) for functional profile c) working capital adjustment. We find that the ld AR submitted before us that if Icra Onine Ltd alone is included in the final list of comparables chosen by the ld. TPO, the assessee would be well within +/- 5% tolerance range permitted in the statute and hence no adjustment would be required to be made to international transaction of the assessee. He further submitted that once this is done, the adjudication of other grounds on comparables for both inclusion and exclusion would become a ..... 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