9911796707
TMI Blog2022 (12) TMI 922X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961 ("the Act"). 2. On the sand in the circumstances of the case and in law, the learned TPO erred and the Hon'ble DRP further erred in upholding confirming the action of the TPO of rejecting the companies selected by the Appellant as comparable for the purpose of benchmarking the international transaction entered into by the Appellant. 3. On the facts and in the circumstance of the case and in law, the learned TPO erred and the Hon'ble DRP farther erred in upholding the action of the TPO of selecting companies as comparables for the purpose of determining the arm's length price without considering the fact that their functions undertaken, assets employed and risks borne were not comparable to those of the Appellant. 4. Without prejudice to the above, on the facts and in circumstances of the case and in law, the learned AO TPO failed to consider the correct calculations of the operating margins of the comparable companies selected by the learned Transfer Pricing Officer. The Appellant pays that the transfer pricing adjustment of Rs. 293.56,738 be deleted. Grounds relating to Corporate tax 5. On the facts and the circumstances of the case and in law, the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omparable with three-year average weighted margin of 5.25%: (a) Gati Ltd (seg); (b) Gordon Woodroff Logistics Limited; (c) PL Shipping and Logistics Limited ; (d) Patel Integrated Logistics Limited; (e) Savani Transport Private Limited; (f) Seaway Shipping And Logistics Limited (seg); and (g) Sical Logistics Limited (seg). 7. As the assessee computed its own PLI at 2.14% from its logistics operations with associated enterprises, accordingly, it claimed that international transactions pertaining to logistics operations with associated enterprises are at arm's length price ('ALP‟). As per the assessee's transfer pricing study report, assessee and its associated enterprises are in business of providing services with respect to sea/ocean and air freight forwarding. To supplement these activities assessee also provided certain ancillary services like cargo handling, logistics management etc. Depending on origin and destination of a freight package, assessee can be classified as an origin company or destination company. In its transfer pricing study, following functions have been stated to have been performed by the origin company and destination company in relation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of air shipment, there is a possibility, that the portions of the total consignment have been separated and have not arrived on the same flight. This is called short landing and could create problems for the consignee in clearing the goods. The DC is responsible for assessing the amount of short landing and communicating the same to the OC. Additionally; it is the DC, which liaises with the shipping company offices and customs. * Arranging transshipment of goods as per the instructions Once the shipment arrives at the main destination port, it may be shipped inland by another service provider. For instance, a shipment landing at Mumbai port is transported to final destination of the shipment through local transporter. The DC is responsible for scheduling and hiring the inland transport service provider and evaluating its performance and efficiency. * Preparing necessary Shipment documentation and intimating the consignee Once the shipment is received and found to be in order, a document called the Cargo Arrival notice is generated, and is sent to the consignee as intimation that the shipment has arrived and awaits collection. DC prepares a docume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns before the learned Dispute Resolution Panel ('learned DRP') against the adjustment proposed by the TPO/AO. The learned DRP vide directions dated 26/12/2014, issued under section 144C(5) of the Act dismissed the objections filed by the assessee in respect of selection of comparables by following its approach adopted in assessee's own case for assessment year 2008-09. Learned DRP further directed the TPO to verify the margins of the comparables and adopt correct margin for computation of adjustment. The TPO vide letter dated 29/01/2015, communicating the effect of learned DRP's direction to the AO, submitted that the assessee has not filed any computation of PLI in support of its claim regarding error in margins calculation. The TPO further submitted that the PLI of all the companies considered as comparable was recalculated and no mistake was found in same. Therefore, the TPO proposed no change in computation of benchmarking PLI as well as the adjustment. In conformity, the AO passed the impugned final assessment order under section 143(3) read with section 144C (13) of the Act. Being aggrieved, assessee is in appeal before us. 11. During the course of hearing, learned Authorise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther find that even the learned DRP rejected the objections filed by the assessee in respect of these companies by following its approach adopted in assessee's own case for assessment year 2008-09. It is pertinent to note that in assessee's appeal for assessment year 2008-09 these companies were found to be, inter-alia, functionally not comparable to the assessee. In the present appeal, nothing has been brought on record to show any change in functional profile of these comparables in the year under consideration vis-à-vis assessment year 2008-09. From the perusal of annual reports of these companies, forming part of the paper book, we find that there is no change in functional profile in the year under consideration and the functional dissimilarity with the assessee in the year under consideration still exists. Thus, in view of the above, our findings rendered in assessee's appeal, in ITA No. 7024 of 2012 for assessment year 2008 - 09, in respect of these companies shall apply mutatis mutandis to the present appeal. The relevant findings rendered in assessee's appeal, in OOCL Logistics (India) Pvt. Ltd. v/s DCIT, in ITA No. 7024 of 2012, for assessment year 2008-09, vide or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices as the relevant segment. We find that under the logistics services, Balmer Lawrie and Company Ltd offers services including import consolidation by air, air and sea freight forwarding, customs house agency, handling of project cargo, Multimodal transportation, chartering of aircraft and vessels and door-to-door services. Further, in respect of logistic infrastructure, the services offered by Balmer Lawrie and Company Ltd include aggregation of long distance cargo, in transit storage, warehousing, custom house clearance and transportation to and from ports. Further, the company has Container Freight Stations (CFS), which operates as an extension of the port, at Kolkata, Navi Mumbai, Chennai and the company is exploring possibilities of setting up new CFS at other locations within the country. Thus, in comparison to the functions performed by the assessee, as noted above, we find that under the relevant segment, i.e. logistic infrastructure and services, Balmer Lawrie and Company Ltd is rendering wide range of logistics solutions to its customers, which renders the company to be functionally not comparable to the assessee. 13. In addition to above, we also find from the peru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... segment varies as per the nature of transaction, which may have no relation with the gross revenue. For example, a manufacturing unit will need relatively more area than a trading unit. Similarly, a service unit will need still lesser area. In such circumstances, apportioning common Rent expenditure on the basis of gross revenue from such varied divisions, will give skewed results of segment profitability. Similarly, contribution of various segments to other items of expenses varies depending upon the nature of transaction, extent of capital and labour required etc. etc. So all common expenses cannot be apportioned in one stroke in the ratio of gross revenue from different segments, each having its own separate features and characteristics. One can logically make allocation depending upon the nature of expenditure and appropriate allocation key. Since in the case of Balmer Lawrie, neither the nature of common unallocated expenses is known, nor the information concerning the appropriate allocation keys is available, we cannot approve the allocation of common expenses in the ratio of gross revenue from each segment. That being the position, the computation of the profit margin of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ention of the assessee on the basis that PLI working of the company has been provided to the assessee, during transfer pricing assessment proceedings. The learned DRP also rejected the objections of the assessee against the selection of this comparable and upheld the findings of the TPO. We find that the TPO considered carrying and forwarding segment of South India Corporation Ltd as comparable to the assessee. As per the Director‟s report of South India Corporation Ltd, forming part of the paper book, we find that the company is performing stevedoring activities e.g, handling of coal, foodgrains, steel, lignite, limestone and transporting the goods. The relevant portion of the Director‟s report in respect of clearing and forwarding division of South India Corporation Ltd, is as under: "Clearing and Forwarding Division The performance of this division of the Company is satisfactory. The Company has bagged a new contract from Karnataka Power Corporation Limited for handling coal by all rail route besides the existing contract of handling coal by rail-sea route. The existing contracts with Tamilnadu Electricity Board for handling coal and the contract with Central War ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under section 92CA (3) of the Act retained this company for the purpose of benchmarking. In proceedings before the learned DRP, the assessee raised no objections for exclusion of Om Logistics Limited as a comparable. It is only in the present appeal, assessee has sought exclusion of Om Logistics Limited for the benchmarking the aforesaid international transaction. The learned DR submitted that this company was selected by the assessee and since it had passed all the filters, therefore, was considered as a comparable to the assessee by the TPO. The learned DR further submitted that this company is primarily into providing logistics services. On the other hand, learned AR placed reliance upon the decision of the coordinate bench of the Tribunal, wherein this company was excluded for the reason that it has significant asset base. 20. We have considered the rival submissions and perused the material available on record. The relevant details of the fixed assets of the assessee, as per the schedule forming part of the financials, are as under: SCHEDULE-2 - FIXED ASSETS (Refer Note 1(ii) on Schedule 12) Particulars Fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re than those during the year under consideration i.e financial year 2009-10. Also, it was observed by the TPO that the operations as well as the background of the aforesaid company had remained the same as in the last two preceding years. Accordingly, on the basis of his aforesaid observations the aforesaid claim of the assessee was rejected by the TPO. As regards the claim of the assessee that the aforesaid company was having super profit, it was observed by the TPO that merely for the said reason the same could not be rejected as a comparable. In fact, the TPO had observed that for rejecting a company as a comparable, for the reason, that it had shown super profit. It has to be shown by the assessee that there were exceptional events or situation leading to higher than the normal profits in the case of such comparable. Accordingly, it was observed by the TPO that as no such exceptional circumstances or events had been shown by the assessee, therefore, the plea of the assessee that the aforesaid company be rejected as a comparable did not ment acceptance. Apart therefrom, it was observed by the TPO that as the OP/TC margin of the company was ranging from 9.76% to 17.37%, and in f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revious Year 5,506.98 5,493.95 48.34 10,954.59 472.40 378.53 38.22 814.71 10,139.88 SCHEDULE-6 INTANGIBLE ASSETS Computer Software 29.01 - - 29.01 12.97 9.67 - 22.64 6.37 18.04 29.01 - - 29.01 12.97 9.57 - 22.64 6.3 16.04 Previous Year 22.01 7.00 - 29.01 3.93 9.04 - 12.97 18.04 Also, a perusal of the 'annual report' of the aforesaid company reveals that unlike the assessee it has various warehouses across the country and has increased the fleet of its vehicles. In order to fortify his aforesaid claim, the Id. A.R had drawn our attention to Page No. 7 of the "annual report' of the aforesaid company, which reads as under: "Strengthening the Infrastructure As envisaged in the last report, Your company has taken vanous steps during the year to strengthen its infrastructure base across the country. We have successfully launched the warehouses at Jamalpur (Delhi NCR region), Sanad near Ahmedabad and Sriperambadur near Chennai and plan to setup more warehouses in near future at strategic locations throughout the country. Your company also set up about 20 more branches at strategic locations. Further th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l year in public domain. We find that learned DRP rendered no findings in respect of this company. It is the plea of the assessee that data for relevant financial year was submitted before the TPO. However, the TPO did not consider the same. The annual report of this company is forming part of the paper book from page No. 216 - 237. In the present case, it is not in dispute that none of the lower authorities has examined the relevant data to determine the comparability of Gordon Woodroffe Logistics Limited with the assessee. Therefore, in view of the above, we deem it appropriate to remand the issue of comparability of Gordon Woodroffe Logistics Limited to the file of TPO/AO for de novo adjudication in view of the data now referred by the assessee, during the course of hearing. The assessee as well as the TPO/AO shall be at liberty to furnish/seek any other information/document as may be required for determining the comparability of the aforesaid company with the assessee. 16. As a result, grounds no. 2 and 3 raised in assessee's appeal are allowed for statistical purpose. 17. As the issue arising in ground No. 5 raised in assessee's appeal is pertaining to grant of credit of TDS ..... X X X X Extracts X X X X X X X X Extracts X X X X
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