Tribunal grants relief on transfer pricing, marketing fees, foreign exchange loss but dismisses penalty.

The Tribunal partly allowed the assessee's appeal, directing the exclusion of certain comparables for transfer pricing adjustment, deletion of the addition on account of marketing service fees, and granting the deduction for foreign exchange loss. The issue of penalty proceedings under Section 271(1)(c) was dismissed as premature.

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Issues Involved:
1. Transfer pricing adjustment.
2. Addition on account of marketing service fees.
3. Disallowance of foreign exchange loss.
4. Initiation of penalty proceedings under Section 271(1)(c) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Transfer Pricing Adjustment:
The assessee challenged the transfer pricing adjustment of Rs. 14,03,65,751/-. The assessee, a subsidiary of Sabre Asia Pacific Pte. Ltd., markets and distributes the Computerized Reservation System (CRS) in India. The assessee's TP study report relied on four comparable companies and applied the Transactional Net Margin Method (TNMM) for benchmarking, arriving at a Berry Ratio of 0.97. The TPO, however, considered other comparables and arrived at an average margin of 21%, resulting in a transfer pricing adjustment of Rs. 17,33,04,809/-, later reduced to Rs. 14,03,65,751/- by the DRP.

The Tribunal directed the exclusion of the following comparables based on functional dissimilarity:
- Aptico Ltd: Engaged in diverse activities not related to marketing support services.
- BVG India Ltd: Involved in facility management and other services, not marketing support.
- Axis Integrated Systems Ltd: Engaged in trading digital certificates and providing liasioning services.
- Killick Agencies and Marketing Ltd: Involved in shipbuilding and water treatment business.

The Tribunal upheld the inclusion of Quadrant Communication Ltd. as a comparable, as directed by the DRP.

2. Addition on Account of Marketing Service Fees:
The assessee contested the addition of Rs. 2 Crores as undisclosed income from marketing service fees. The Tribunal noted that this issue was covered in favor of the assessee in its own case for A.Y. 2012-13. The assessee had entered into an agreement with its AE for marketing services, receiving Rs. 54,13,02,874/- against incentives paid to travel agents amounting to Rs. 56,13,02,874/-. The Tribunal found that the differential amount of Rs. 2 Crores was neither received nor receivable from the AE, and thus, could not be added as income. The Tribunal, following its earlier decisions, directed the deletion of the addition.

3. Disallowance of Foreign Exchange Loss:
The assessee challenged the disallowance of foreign exchange loss of Rs. 19,49,09,643/-. The Tribunal noted that this issue was also covered in favor of the assessee in its own case for A.Y. 2012-13. The foreign exchange loss arose during the regular course of business and was allowable as business loss. The Tribunal directed the AO to grant the deduction for the foreign exchange loss, following its earlier decisions.

4. Initiation of Penalty Proceedings under Section 271(1)(c):
The Tribunal found that the issue of initiation of penalty proceedings under Section 271(1)(c) was premature for adjudication at this stage and dismissed the ground as premature.

Conclusion:
The appeal of the assessee was partly allowed, with directions to exclude certain comparables for transfer pricing adjustment, delete the addition on account of marketing service fees, and allow the deduction for foreign exchange loss. The issue of penalty proceedings was dismissed as premature.

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