Tribunal overturns transfer pricing adjustments for marketing and technical support services, grants fresh determination.

The Tribunal set aside the transfer pricing adjustments in the international transactions of 'Rendering of marketing support services' and 'Technical support services'. The matter was remitted to the Assessing Officer/Transfer Pricing Officer for a fresh determination of the arm's length price, considering the exclusions and inclusions directed by the Tribunal. The assessee was granted a reasonable opportunity to be heard in the new proceedings, and both appeals were allowed for statistical purposes.

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Issues Involved:
1. Transfer pricing addition in the international transaction of 'Rendering of marketing support services'.
2. Transfer pricing addition in the international transaction of 'Technical support services'.

Detailed Analysis:

1. Transfer Pricing Addition in the International Transaction of 'Rendering of Marketing Support Services':

The assessee, engaged in the manufacture, distribution, and sale of telecommunication equipment and related services, declared international transactions in Form No. 3CEB. The Assessing Officer (A.O.) referred these transactions to the Transfer Pricing Officer (TPO) for determining the arm's length price (ALP). The TPO rejected the six comparables selected by the assessee for the 'Rendering of marketing support services' segment and chose ten new comparables, resulting in a proposed transfer pricing adjustment of Rs. 2,64,17,933/-. The CIT(A) directed the exclusion of Rites Ltd. and WAPCOS Ltd. from the comparables list, which led to the contested transfer pricing addition.

The Tribunal analyzed the functional profile of the assessee and the comparability of Apitco Ltd., which was included by the TPO. The Tribunal found that Apitco Ltd. provided diverse services such as project management consulting, feasibility studies, and energy-related services, which were not comparable to the marketing support services rendered by the assessee. Consequently, the Tribunal ordered the exclusion of Apitco Ltd. from the final set of comparables, citing the judgment of the Hon’ble jurisdictional High Court in Rampgreen Sales Pvt. Ltd. vs. CIT, which mandates functional similarity even under the TNMM.

2. Transfer Pricing Addition in the International Transaction of 'Technical Support Services':

The assessee provided technical support services, including installation, commissioning, testing, software configuration, and post-implementation equipment support. The TPO combined seven international transactions under the 'Technical services' segment and selected six fresh comparables, leading to a transfer pricing adjustment. The CIT(A) directed the exclusion of Alphageo India Ltd. and the inclusion of TCIL, which was contested by both the assessee and the Revenue.

The Tribunal examined the comparability of several companies:

- Mahindra Consulting Engineers Ltd.: The Tribunal found that the consultancy services provided by this company in areas like urban infrastructure and industrial infrastructure were diverse and not comparable to the technical support services rendered by the assessee. Thus, it was ordered to be excluded from the comparables list.

- STUP Consultants Pvt. Ltd.: The Tribunal noted that this company provided civil engineering and architecture consultancy services, which were different from the technical support services of the assessee. Therefore, it was excluded from the comparables list.

- Semac Ltd.: The Tribunal observed that this company provided engineering consultancy for industrial projects, which was not comparable to the technical support services of the assessee. Hence, it was excluded from the comparables list.

- Intarvo Technologies Ltd.: The Tribunal upheld the exclusion of this company, as its services related to call center technical support and installation of BTS equipment for telecom towers were not similar to the services provided by the assessee.

- Microland Ltd. (Infrastructure Management Service): The Tribunal upheld the exclusion of this company, noting that it provided end-to-end IT infrastructure management services and engaged in research and development, which were not comparable to the assessee's services.

Regarding the Revenue's appeal:

- Alphageo (India) Ltd.: The Tribunal upheld the exclusion of this company, as it provided seismic services to the oil exploration sector, which were not comparable to the technical support services of the assessee.

- TCIL: The Tribunal set aside the inclusion of TCIL and remitted the matter to the Assessing Officer/TPO to ascertain the nature of consultancy services provided by TCIL and decide on its inclusion afresh.

Conclusion:

The Tribunal set aside the impugned order regarding transfer pricing adjustments and remitted the matter to the AO/TPO for a fresh determination of the ALP of the international transactions of 'Rendering of marketing support services' and 'Technical support services', in line with the observations and directions provided. The assessee was to be given a reasonable opportunity of being heard in the fresh proceedings. Both appeals were allowed for statistical purposes.

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