TMI Blog2021 (10) TMI 1392X X X X Extracts X X X X X X X X Extracts X X X X ..... total income of the Appellant on account of adjustment in the arm's length price of the international transactions entered by the Appellant with its associated enterprises. Accordingly, the learned AO has assessed the total income at Rs. 2,74,56,554 as against the returned income of Rs. 1,88,70,768 as computed by the Appellant: 2. The learned AO/ TPO and the learned DRP have erred, in law and in facts, by not accepting the economic analysis undertaken by the Appellant in accordance with the provisions of the Act read with the Income Tax Rules, 1962 ( Rules ), conducting a fresh economic analysis for the determination of the ALP in connection with the impugned international transaction, and holding that the Appellant's international transaction is not at arm's length; 3. The learned AO/ TPO have erred, in law and in facts, by not considering Impresario Event Management India Private Limited as a comparable company, disregarding the directions issued by the DRP; 4. The learned AO/ TPO and the learned DRP have erred, in law and in facts, by determining the arm's length margin/ price using data pertaining only to FY 2010-11 which was not available for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Services Limited c) Indus Technical Financial Consultants Limited Ground 7 The learned AO/TPO has erred in considering the penalty of Rs.68,82,700 paid under Employees Provident Fund and Miscellaneous Provisions Act, 1952, as operating in nature, and in considering liabilities no longer required written back of INR 6,03,728 as non-operating in nature while computing the operating margin on operating cost of Lloyds India at 7.21%. 3. The above grounds given rise to the following issues:- a) TP adjustment made by the A.O. b) Short credit of advance tax. Other grounds are either general in nature or consequential. 4. The assessee was incorporated in October, 2003. It primarily, oversees its principal LTSBs Outsourcing Contracts in India and provided following support services to its A.E. Staff Welfare support Risk and compliance management Incident and crisis management coordination Corporate Social Responsibility (CSR) Industry representation Provide support to business units in industry regulation and trends Provide support in seeking other opportunities Supplier Management Support Other services. Henc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omparable companies. The Ld. A.R. submitted that the two comparable companies selected by TPO, viz., Asian Business Execution Conferences Ltd. and ICC International Agencies Ltd. have been held to be not good comparables in the case of ALCON Laboratories India Pvt. Ltd. (IT(TP)A No.221/Bang/2016). Accordingly, he prayed for exclusion of the above set of two companies. II.2 We heard Ld. D.R. and perused the record. We notice that the assessee has not raised any specific ground with regard to Asian Business Execution Conferences Ltd. Accordingly, we decline to entertain the contentions with regard to the above said company. The Ld A.R submitted that M/s ICC International Agencies Ltd has been held to be not good comparable company for an assessee providing market support services, by the coordinate bench in the case of ALCON Laboratories India Pvt. Ltd. (supra). The relevant observations made by the Tribunal in respect of this company are extracted below: 21. The relevant ground of Revenue is Ground No.2 which is reproduced below:- 2. The DRP erred in directing to exclude M/s. ICC International Agencies Ltd., holding it to be functionally dissimilar on the gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee that annual report of this company available on page 1100 1104 of the paper book. As per the same, we find that this company is deriving income from trading activity and also maintaining inventories. Both these arguments are supported by annual report of this company available on page 1100 1104 of the paper book. Since the assessee is not engaged in trading activity, in our considered opinion, this company cannot be considered as good comparable in the present case and hence we direct the AO/TPO to exclude his company from the list of final comparable. 23. Following the said decision, we direct exclusion of the aforesaid company ICC International Agencies Ltd., from the list of comparable companies. The ld. DR submitted that ICC International Agencies Ltd., was accepted by assessee himself as comparable before the TPO. We find that before the DRP in the objections, the assessee has objected to inclusion of ICC International Agencies Ltd., as comparable company on several counts at page 05 of the written submission filed before the DRP on 04.12.2015. The Special Bench of the Hon'ble Tribunal in the case of DCIT v. Quark Systems (P) Ltd. ([2010] 38 SOT 307 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee is that the penalty paid under PF Act should be considered as non-operating in nature. The Ld. A.R. submitted that the assessee has paid penalty of Rs.68.82 lakhs under Employee Provident Fund and Miscellaneous Provisions and the TPO has considered the same as operating in nature. The Ld. A.R. contended that the penalty paid should be considered as non-operating in nature, as it does not relate to day to day operations of the assessee company. V.2 We heard Ld D.R and perused the record. With regard to the penalty payment of Rs.68.82 lakhs, we are unable to agree with the contention of the assessee that it is non-operating in nature. The above said payment has been made by the assessee under Employees Provident Fund and Miscellaneous Provisions Act and this payment is linked to salaries paid by the assessee. Hence it is connected to the business carried on by the assessee. Hence, the penalty paid under the above said Act, in our view, constitutes operating expenses in the hands of the assessee. Accordingly, we hold that the AO/TPO was right in considering the same as operating in nature. VI.1 The next issue contested by the assessee relates to working capi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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