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TMI Blog2023 (11) TMI 801X X X X Extracts X X X X X X X X Extracts X X X X ..... us by learned counsel. 3. In so far as the issue of selection/rejection of comparables is concerned, briefly, the facts are, the assessee is a resident corporate entity and wholly owned subsidiary of Honda R & D Company Ltd., Japan. As stated, the assessee is engaged in providing market research and testing services to its overseas Associate Enterprises (AEs) and is remunerated on a cost plus mark up basis. Basically, the assessee has been classified as an information technology enabled service (ITES) provider. In the year under consideration, the assessee has provided market research and testing services to its overseas AEs and earned revenue of Rs. 21,59,58,156/-. To benchmark such international transaction with AEs, the assessee has undertaken economic analysis. In the transfer pricing study report (TPSR), the assessee has applied transactional net margin method (TNMM) as the most appropriate method to benchmark the international transaction with AEs. Operating profit (OP) to operating cost (OC) ratio was used as profit level indicator (PLI). 4. For comparability analysis, the assessee has selected 11 companies as comparables with average margin of 5.05%. The margin shown by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tourism Development Corporation Limited (ii) Idma Laboratories Limited. Hereinafter, we will deal with each of the comparables in dispute before us. (i). Aptico Limited : 6. Objecting to the selection of this company, learned counsel submitted, it is functionally dissimilar, as it is engaged in providing highend technical consultancy relating to asset reconstruction and management services, micro enterprise development, skill development, entrepreneurship development and cluster development. He further submitted, the RPT filter of more than 25% cannot be applied in absence of relevant data. In support, the assessee relied upon following decisions : (i). CIT vs. Phillip Morris Services Ltd. (ITA 1468/2018- Delhi High Court). (ii). PCIT vs. International SOS Services India Pvt. Ltd. (ITA 454/2016- Delhi High Court) (iii). Motorola Solutions India Pvt. Ltd. vs. DCIT (ITA No. 5797/Del/2012) dated 31.10.2019-Delhi Tribunal (iv). Ciena India Pvt. Ltd. vs. DCIT (2015) 40 ITR (Trib) 524 (Delhi). Thus, he submitted, the company, being functionally dissimilar, should be rejected. 7. We have considered rival submissions and perused materials on record. We have also gone through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilable. Therefore, RPT filter of more than 25% cannot be applied. Thus, he submitted that the company should be rejected. In support, he relied upon the decision of coordinate Bench in case of Motorola Solution India Pvt. Ltd. vs. DCIT (ITA No. 5797/Del/2012) dated 31.10.2019. 9. Learned Departmental Representative submitted that the company is functionally similar to the assessee, hence, has been rightly included as comparable. Drawing our attention to the profit and loss account for the year ended 31st March, 2008, learned Departmental Representative submitted that the company has only one segment and has earned revenue in that segment only. Therefore, assessee's contention that it has various segments is unacceptable. He submitted, the decision of the Tribunal in case of Motorola Solution India Pvt. Ltd. (supra) would not apply to the facts of the present appeal, as Motorola was involved in market support services whereas, the assessee is involved in market research and testing services. 10. In reply, learned counsel for the assessee submitted that the TPO himself has treated the assessee to be in the business of business support services and has accordingly selected comparabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arts inventory for providing technical support during and after the sales. In this context, he drew our attention to the website extract of this company placed in the paper book. He further submitted, RPT details of the company are not available so as to apply RPT filter of more than 25%. Thus, he submitted, the company cannot be treated as comparable. In support, he relied upon the decision of coordinate Bench in case of Motorola Solutions India Pvt. Ltd. (supra). 13. Strongly relying upon the observations of the departmental authorities, learned Departmental Representative submitted that the company, being functionally similar to the assessee, has rightly been selected. Drawing our attention to the balance sheet of the company, learned Departmental Representative submitted that it does not show any inventory. Thus, he submitted, the company should be rejected. 14. We have considered rival submissions and perused materials on record. On a perusal of the profit and loss account of the company, placed in the paper book, it is observed that it has shown income from commission, consultancy and services. Whereas, the segmental details relating to the aforesaid segments are not availa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construction management, commissioning and testing, operation and maintenance, quality assurance & management, software development and human resource development. The annual report further says that it is a techno-commercial organisation under the aegis of Ministry of Water Resources and utilizes the talent and expertise developed in the various organisations of Government of India and State Governments. Under segment reporting, it has reported segment revenue from consultancy and engineering projects and lump sum turnkey projects. Though, the Revenue earned from different segments have been mentioned, however, such details relating to expenses are not there. Therefore, the annual report lacks proper segmental reporting. Thus, as could be seen, the company is functionally different from the assessee in the sense that the assessee has only one segment, whereas it has a number of segments including implementing turnkey projects. Whereas, sufficient segmental details are not available. Thus, in our view, this company cannot be treated as comparable to the assessee. For the afore-stated reasons, in case of Motorola Solution India Pvt. Ltd. (supra) also, the company was rejected as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned DRP has accepted this company as a comparable. Thus, he submitted, it cannot be rejected in the impugned assessment year. 22. Drawing our attention to the annual report of the company, learned Departmental Representative submitted that it is a pharmaceutical product manufacturing company, hence, under no circumstance, can be treated as comparable to the assessee. In this context, he drew our attention to the annual report and particularly profit and loss account. 23. We have considered rival submissions and perused materials on record. Though, learned Departmental Representative has vehemently opposed the inclusion of this comparable by stressing upon the functional dissimilarity, however, on perusal of the annual report of the company, it is observed that under segment reporting, it has shown revenue from formulations of pharmaceutical products as well as quality control testing. Therefore, QCT division, in our view, is comparable to the assessee. It is further to be noted that in assessee's own case in assessment year 2005-06, the company was accepted by the TPO as a comparable to the assessee and upheld by Hon'ble jurisdictional High Court. Pertinently, in assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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