AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2011 (4) TMI 856
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.... around the world. The group has 450 hubs, warehouses and terminals and approximately 230 gateways. DHL World Wide B.V. Netherlands (for short DHL) holds 100% of the total equity of the assessee company. The assessee company had entered into an agreement with DHL by which DHL had granted the assessee company access to the DHL net work for transportation and delivery of consignments in consideration of which the assessee company was required to pay a net work fees to DHL as per the terms of the agreement. The assessee company also rendered similar services to DHL as forwarders and couriers in India and was receiving fees accordingly. Since assessee company had certain international transactions by way of payment of net work fees, reimbursement expenses, purchase of marketing material etc. The same was referred to the Transfer Pricing Officer (for short TPO) to determine the Arm's Length Price. Initially, the assessee company adopted two comparables whose average arithmetic mean was 3.91% against assessee's margin of 7.70%. Subsequently a list of six comparables by updating the comparable search was submitted. The list of comparables furnished is as under: i) DTDC Courier and....
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....two comparables i.e. DTDC and First Flight Couriers Ltd. and finally worked out the adjustment as under: Total turnover of the assessee during the year `.503.41 crores Desired total costs based an arithmetic mean of 7.34% determined above `.466.46 crores Less: Actual costs claimed by assessee, other than net work fee (481.28 - 269.52) `.211.76 crores Desired cost of 'net work fee' paid to AE `.254.70 crores Actual 'network' fee paid to AE during the year `.269.52 crores Express 'network fee' paid to the AE during the year `. 14.82 crores Applying safe habour limits: Desired cost of 'network fee' to AE based on arithmetic mean `.254.70 crores Safe harbour limits + 5% = `.267.44 crores - 5% = `.241.97 crores Actual total expenses of "network charges" claimed by the assessee: `.269.72 crores Since, the assessee's transaction is beyond the safe turnover limits of + or 5% the ALP of the international transaction of 'network fee' paid to AEs is adopted at `.254.70 Crores, as against `.269.52 Crores claimed by the assessee, requiring a downward adjustment of `.14.82 Crores, as below: ALP of 'network fee' to AE, as shown by assessee `.269.52 Crores ALP of the transaction as....
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.... due to lower turnover, their profitability would be lower and not properly comparable. The AO has compared the turnover of the companies which has reasonably high turnover and become more comparable, hence the DRP does not find any irregularity in applying the filter of 20% for rejecting 3 companies and the assessee's objection on this account is overruled. The assessee has objected to computation of profit margin by applying TNNM method on the ground that misc. income has been included in the turnover. The DRP called for the details of misc. income which included interest also. The assessee did not provide the nature of balance misc. income. Hence, the DRP is of the view that the AO should re-work the margin of profit by excluding the interest income included in the misc. income from the gross total turnover as well as the interest expenditure from the expenses side. The AO shall work out the margins afresh and consequential adjustment. The assessee's objection for rejecting Transport Corporation of India as comparable is also devoid of any merits, because when proper comparable companies are available, there is no requirement for making comparison with segmental results ....
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....mounting to Rs.88,86,724/- in the case of DTDC and Rs.47,24,722/- in the case of First Flight Couriers Ltd. are not available, therefore same should not have been included in the operating receipts. On a query by the Bench whether details of other receipts are available, he submitted that so far assessee has not been able to obtain such details and he would have no objection if the matter is remitted back to the file of the TPO/DRp and assessee would try to furnish these details. 6. On the other hand, Ld.DR submitted that there is no force in the submissions of the Ld.counsel of the assessee because the turnover in the case of On-Dot Couriers & Cargo Ltd. was Rs.27.29 crores and the turnover of Skypak Services Specialists Ltd. was Rs.18.48 crores which was below 5% of the turnover of the assessee and, therefore, the filtering has been applied at 5% which is totally justified. Only in the case of Over Time Express Ltd. the turnover was of Rs.94.99 crores which was less than 20%. Even 20% filtering is justified. It is a known fact that only comparables can be compared because operations of small businesses are totally different from large businesses and when turnover of a com....
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....in many such results certain expenditures, particularly expenditure on account of interest and head office, are generally not allocated and shown in the published results as separate expenditure. Therefore, the TPO was correct that when direct comparables were available, then there was no need to consider the segmented results of TCI. As far as the last submissions is concerned, we agree principally with the submissions of the Ld.counsel of the assessee that it is only the operating profit which can be considered. The details of other income in the case of DTDC and First Flight Couriers Ltd. have been summarized at page 233 of the paper book which read as under: Particulars DTDC Courier & Cargo Ltd. First Flight Courier Ltd whether Nonoperating in nature (Yes/No) Other Income Interest income 18,18,341 39,43,360 Yes Rent received 5,87,508 - Yes Dividend received 11,839 - Yes bad Debts recovered 7,01,046 - No Penalty collected 15,65,480 - Yes E-mail facility charges collection 59,915 - No Discount Received 43,42,262 - No Handling Charges 79,23,451 No Rent Deposit written back 9,24,358 Yes Other receipts/M....