TaxTMI 
TaxTMI 
TaxTMI 
2014 (11) TMI 429
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.... appreciating the fact that the assessee company as also the comparables were functionally similar in so far as marketing support services are concerned ? 2. The appellant prays that the order of the DRP on the above grounds be set aside and that of the A.O. be restored." Grounds taken in Cross Objection by the assessee read as under :- "1. In respect of Comparable companies selected by the Respondent: On the circumstances of the case and in law, the Hon'ble DRP has erred in directing the learned AO / TPO to exclude 2 comparable companies i.e., ICRA Management Consulting Services Ltd. and Rockman Advertising & Marketing (India) Ltd. selected by the respondent, on the basis that these comparables are consistently loss marking companies. The respondent submits that these 2 comparables have earned operating profits in the immediate preceding 2 years & only in the year under consideration these companies have suffered operating losses and hence, the directions of the Hon'ble DRP is factually incorrect. 2. In respect of Comparable companies selected by the learned TPO: Without prejudice to the above, on the circumstances of the case and in law, the Hon 'ble DRP has err....
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....res a 'Transactional Profit & Loss Account' for ascertaining the margins earned by it from each category of the transactions. 5. In respect of its international transaction, the assessee had adopted TNMM method as most appropriate method and identified 11 companies as comparables to its Marketing & Sales support service segment. As per the assessee's calculation, the operating margin earned by RRM India was 13.44% on costs as against the operating margins of comparable companies of 8.96% on costs. However, the TPO has accepted the ALP computed by the assessee for all transactions except for Marketing & Sales support services. The contention of the assessee before the DRP was that the TPO had selected a set of 5 companies which are not at all functionally comparable to the assessee. The comparables selected by the TPO are into payroll processing, fund management and related business as compared to RRM India which provides marketing & sales support services to its AEs. Thus, the TP addition of Rs. 93,83,628/- in respect of marketing and sales support services was disputed by the assessee before the DRP. 6. By the impugned order, the DRP observed that TPO has not given reason for re....
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....#39;Cameo Corporate') As per the Annual Report, Cameo Corporate provides services in the areas of Registry and Transfer Agency services, Data archival and retrieval services and Medical Transcription services. The fact that this company acts as Registry & Share Transfer Agent and also provides services of Document Management and Medical Transcription is verified from the information available on its website. The earning in foreign exchange of Cameo Corporate is only about 20% of its total service income and hence, this company is predominantly earning from domestic sources and not from exports. Table for calculation of ratio of export income: Particulars Amount in Rs. Total Sales 243,667,920 Export Sales 48,791,787 % of Export sales to Total sales 20.02% Accordingly, since Cameo Corporate is functionally different from RRM India, it cannot be said to be comparable to RRM India's business operations. Discussion and directions of DRP: - The DRP has considered the assessee's contention.* It is further seen that the TPO has given no reason for inclusion of this in the list of comparables except that the said comparable was checked in Capitaline. Since ....
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....m exports or local and there is no mention about the foreign exchange earnings in the Notes to Accounts to the Financials. Accordingly, since HCCA Business is functionally different from RRM India, it cannot be said to be comparabie to RRM India's business operations. Discussion and directions of DRP: - The DRP has considered the comparability of the assessee with this company. The only reason that the assessee is providing for its exclusion is that HCCA's earning from exports is not clear from its financials. The company is functionally fairly comparable and there is no reason to exclude a company which is admittedly offering pay roll processing services, The action of the TPO in inclusion of this company is upheld. 5 TSR Darashaw Limited (referred to as 'TSR') TSR is into 'Payroll process outsourcing' activities. In addition to this, TSR also provides Share Registry and Transfer services and-Records management services. The business activities of TSR can also be understood from the Revenue recognition policy mentioned by it in Note No.4 of Schedule K on Significant Accounting Policies. Revenue recognition policy mentioned is as under: "Income from Se....
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....uded. The Ld. AO/TPO is directed to exclude these two comparables also from the list and then work out the +5% margin and appropriate adjustment will be made only if the assessee remains beyond the range after giving effect to the above directions in respect of the comparability." 7. We have considered rival contentions, gone through the orders of the authorities below and found that assessee has rendered marketing, sales support and coordination services to the group companies for their sales in India. The main transactions of assessee are in the nature of marketing and various sales support services, offers and quotes received from groups' customers in India, providing information to group companies on market opportunities, trends follow up for payments and deliveries, etc. For the purpose of computing ALP, assessee has taken 11 comparables and computed margin which comes to 13.44%, however, the TPO has rejected all these 11 comparables and has taken its own 5 comparables arithmetic mean of which comes at 23.85%. In the TP study, the TPO made an adjustment of Rs. 93,83,628/-, which was more than +5% of the value of international transaction of Rs. 10,23,92,957/-. Accordingly, th....