AI Drafter 
TaxTMI 
TaxTMI 
2015 (9) TMI 65
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....ade by the Learned Transfer Pricing Officer ('the Ld. TPO') in his order dated 13 October 2009 passed u/s 92CA(3) of the Act. That on the fact and in circumstances of the case and in law, 1. the Ld. AO 1 DRP have grossly erred in upholding the adjustment made by the Ld. TPO of Rs. 3,028,346/- to the total income of the appellant vide the TP order dated 13 October 2009 passed u/s 92CA (3) of the Act, on account of redetermination of the arm's length price of the international transaction entered by the appellant with its associated enterprises. 2. while undertaking the addition of Rs. 3,028,346/-, the Hon'ble DRP and Ld. AO 1 TPO have grossly erred in not appreciating that the Appellant had prepared the detailed contemporaneous Transfer Pricing documentation bona fide and in compliance with the Act and Income Tax Rules 1962 ('the Rules') and selected uncontrolled comparable companies based on a detailed Functional Asset and Risk (FAR) analysis following a methodical benchmarking process. 3. the Hon'ble DRP and Ld. AO 1 TPO have grossly erred by not allowing the use of multiple~ year data and determining the arm's length price on the basis ....
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.... Nature of transaction Method used By assessee Method used By assessee 1. Provision of pre-sales and post-sales support services TNMM 51,703,483 2. Receipt of support services TNMM 5,703,177 3. Payment of interest on ECB loan TNMM 96,406 4. Reimbursement of expenses TNMM 575,409 Total 58,078,475 3.2. The assessee had applied TNMM as the most appropriate method for benchmarking the ALP and the PLI was OP/TC. There is no dispute on this. 3.3. Ld. TPO considered the comparables selected by the assessee in the TP report, which were 13 in number having arithmetic mean of 7.68% a against the NP margin of assessee being 5.79%. After considering the updated margins of the comparables and after removing the consistent loss making companies and the companies which were not comparable or whose current year financials were not available, the final set of comparables for seven companies was accepted by ld. TPO, the arithmetic mean of which worked out to 11.15%. In doing so the ld. TPO, inter alia, had rejected Capital Trust Ltd., having arithmetic mean of -9.18%, from the set of comparables. 3.4.....
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....onsultancy fee. 4.2. Ld. counsel further referred to page 397 of the PB, wherein the annual accounts of Capital Trust Ltd. are contained and pointed out that segmental information in regard to this segment is contained in which foreign consultancy has been separately mentioned. 4.3. Ld. counsel referred to the decision of the ITAT Delhi Bench I" dated 25-2-2014 in the case of Nortel Networks India P. Ltd. (rendered in ITA nos. 4765/Del/2011 and 427/Del/2013 for AY 2007-08 & 2008-09), and submitted that in that case it has been held that Capital Trust Ltd.'s consultancy segment is similar to that of Nortel India, which was rendering ITE services like assessee and, therefore, this comparable should not be rejected merely on the ground of incurring persistent losses and functionally not comparable. He referred to para 7 of the said decisions, which is reproduced hereunder: 7. We have heard the rival contentions and perused the material available on record. Apropos Capital Trust comparable, the TPO has observed that primary business of this company is automobiles sales and service. We are of the considered view that a company cannot be excluded from the comparables merely for ....
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.... consultancy was one of the main functions being carried out by the Capital Trust Ltd. 6. We have considered the rival submissions and have perused the record of the case. The assessee was in the business of repair services, computer hardware and software related services, erection, commissioning and installation services. Capital Trust Ltd. was, inter alia, imparting consultancy to foreign banks not having any branches or representative offices in India. The assessee's contention is that this consultancy segment is comparable to the services rendered by assessee. We are not inclined to accept the assessee's contention on this ground because the consultancy service rendered to foreign banks are in no way comparable with the assessee's business. Ld. counsel has relied on the decision of ITAT in the case of Nortel Networks India P. Ltd. (supra) and M/s Bobst India Pvt. Ltd. (supra). We find that in the case of Nortel Networks India P. Ltd. (supra) the Tribunal did not accept the TPO's analysis on the ground of excluding the comparable because the total turnover of the comparable was Rs. 13.92 crores. The Tribunal specifically observed that the analysis had to be carried out on the....