Tribunal excludes comparables, remands tax credit issue for verification. Decision on 18.10.2018

The Tribunal partially allowed the assessee's cross-objection, excluding certain comparables from the Transfer Pricing Officer's determination of the Arm's Length Price for international transactions. The Tribunal directed the exclusion of four comparables due to significant functional differences with the assessee's services. Additionally, the issue of non-allowance of credit for self-assessment tax was remanded back to the authorities for further verification and a proper opportunity of hearing for the assessee. The decision was rendered on 18.10.2018.

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Issues Involved:
1. Inclusion of certain comparables by the Transfer Pricing Officer (TPO) in determining the Arm’s Length Price (ALP) for international transactions.
2. Non-allowance of credit for self-assessment tax paid by the assessee.

Detailed Analysis:

Issue 1: Inclusion of Comparables by TPO
The assessee company, engaged in providing marketing support services to its group affiliates, entered into international transactions which were scrutinized by the TPO. The TPO made an adjustment of Rs. 47,32,323/- to the ALP of the marketing support services provided by the assessee. The assessee contested the inclusion of four comparables selected by the TPO, which were upheld by the Dispute Resolution Panel (DRP).

Comparables Contested:
1. Aptico Ltd.:
- The assessee argued that Aptico Ltd. was functionally different, providing high-end diversified activities such as project report preparation, technical and economic studies, and environmental management consulting.
- The Tribunal found that Aptico Ltd. had a broad range of services that were not comparable to the marketing support services rendered by the assessee. The Tribunal directed the exclusion of Aptico Ltd. from the final list of comparables.

2. Global Procurement Consultants Ltd.:
- This company was involved in providing consultancy services and procurement reviews for projects funded by the World Bank.
- The Tribunal noted the significant functional differences and ordered its exclusion from the list of comparables, emphasizing that the services provided were not similar to the assessee’s market support services.

3. TSR Darashaw Ltd.:
- The company’s business segments included registrar and transfer agent activities, records management, and payroll and trust fund activities.
- The Tribunal found a huge functional disparity between TSR Darashaw Ltd. and the assessee’s services, leading to its exclusion from the comparables.

4. Quippo Valuers and Auctioneers Pvt. Ltd.:
- This company was primarily engaged in asset management services, including the sale of construction equipment and valuation services.
- The Tribunal concluded that Quippo Valuers’ services were not comparable to the marketing support services provided by the assessee and directed its exclusion.

The Tribunal relied on the decision in the case of Philip Morris Services India S.A. Vs. ACIT, where similar comparables were excluded due to functional differences. The Tribunal directed the TPO/AO to exclude these four comparables from the final list.

Issue 2: Non-allowance of Credit for Self-Assessment Tax
The assessee raised an issue regarding the non-allowance of credit for self-assessment tax amounting to Rs. 13,71,911/-. The Tribunal noted that this issue was not adjudicated by the Revenue authorities.

The Tribunal remanded the issue back to the TPO/AO for verification, instructing them to provide the assessee with a proper opportunity of hearing.

Conclusion:
The Tribunal allowed the assessee’s cross-objection partly for statistical purposes. Ground No. 7, concerning the exclusion of certain comparables, was allowed, while Ground No. 9, regarding the verification of self-assessment tax credit, was remanded back to the TPO/AO. The remaining grounds (Nos. 1 to 6, 8, and 10) were dismissed. The decision was pronounced in open court on 18.10.2018.

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