Tribunal deletes adjustments, stresses transfer pricing principles.

The Tribunal allowed the appeal, directing the deletion of adjustments related to corporate management charges, business support segment, and designing services segment. The Tribunal emphasized adherence to internationally accepted transfer pricing principles and judicial precedents, leading to the exclusion of certain comparables and determination of the arm's length price accordingly.

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Issues Involved:
1. Adjustment related to payment of corporate management charges.
2. Adjustment related to business support segment.
3. Adjustment related to designing services and market services support segment.

Detailed Analysis:

1. Adjustment Related to Payment of Corporate Management Charges:
The assessee challenged the adjustment of Rs. 1,62,85,589 made by the TPO for corporate management charges using the CUP method, determining the ALP as NIL. The Tribunal found that the TPO had verbatim lifted findings from the previous year (A.Y 2009-10) without distinguishing any facts. The Tribunal referenced its earlier decision in ITA No. 1882/DEL/2014, where it was established that the payment towards corporate management charges was as per internationally accepted transfer pricing principles and reflective of an arm’s length charge. The Tribunal also cited the Delhi High Court's ruling in EKL Appliances, emphasizing that the TPO cannot disallow expenditure based on extraneous reasoning or the financial health of the assessee. Respectfully following the earlier judgment, the Tribunal directed the deletion of the adjustment of Rs. 1,62,85,589.

2. Adjustment Related to Business Support Segment:
The assessee's sourcing team provided market support services to an AE, and the transaction was initially treated at arm’s length with a margin of 13% against comparables’ 11.37%. The TPO, however, rejected six of the assessee's comparables and added eight new ones, resulting in an average mean margin of 23.25%. The Tribunal considered the exclusion of five comparables:
- Global Procurements Consultants Ltd and TSR Darashaw Ltd were excluded as they were functionally different and had been rejected in the previous year.
- HCAA Business Services Pvt Ltd was excluded for being engaged in payroll processing services, which is functionally different.
- Aptico Ltd was excluded due to its engagement in high-end diversified activities without segmental profitability data.
- Quippo Valuers and Auctioneers Ltd was excluded as it provided asset management services, not comparable to the assessee's market support services.

The Tribunal directed the exclusion of these five comparables from the final set and the determination of the ALP accordingly.

3. Adjustment Related to Designing Services and Market Services Support Segment:
The assessee showed an OP/OC of 16% using eight comparables with an OP/OC of 13.90%. The TPO rejected these comparables and added ten new ones with an OP/OC of 28.20%. The Tribunal considered the inclusion of two comparables:
- Neilsoft Limited and Vama Industries Limited were included as they were accepted as good comparables in the previous year, engaged in similar software engineering services.

The Tribunal also directed the exclusion of eight comparables:
- Engineers India, IBI Chematur Ltd, Mahindra Consulting Engineers Ltd, RITES Ltd, and TCE Consulting Engineers Ltd were excluded as they were not considered good comparables by the TPO in the previous year.
- KITCO Ltd was excluded due to its revenue being primarily from government services.
- Dalkia Energy Services Ltd was excluded for lack of sufficient information and segmental data.
- Kirloskar Consultants Ltd was excluded for insufficient data on the nature and volume of services.

The Tribunal directed the TPO/Assessing Officer to include the two comparables and exclude the eight, determining the ALP accordingly.

Conclusion:
The appeal was allowed, directing the deletion of adjustments related to corporate management charges, business support segment, and designing services segment, following the principles and findings established in the assessee's own case and relevant judicial precedents.

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