TaxTMI 
TaxTMI 
2014 (1) TMI 1700
X X X X Extracts X X X X
X X X X Extracts X X X X
....ailing managerial services and such grievance of the assessee is separately raised in Ground No.16. Ground No.11,12 & 16 read as under: "On the facts and in the circumstances of the case and in law, the learned AO based on the order of the learned Transfer Pricing Officer (learned TPO) and the directions of the Hon'ble DRP has erred in law and on facts in: "11. Considering companies which are functionally different, as comparables to the Appellant. 12. Considering incorrect operating margins for two additional comparable companies relied upon by the learned AO/TPO namely Indus Technical & Financial Consultants Limited and WAPCOS Ltd., 16. Treating the arm's length price of the professional fees paid towards availing of managerial services as NIL. 3. The assessee company is an Indian Company and is a subsidiary of Platinum Guild SA, Switzerland and the assessee is engaged in the business of promotion and marketing of platinum jewellery in India. It has entered into following international transactions with two of its AEs: S. No. Nature of service F.Y.2007-08 Method adopted by assessee 1. Provision of promotion and marketing se....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 13.41 4.18 6. I D C (India) Prowess 15.77 99.43 0.95 15.43 7. India Cements Capital Ltd. Prowess 7.95 97.48 0.72 30.91 8. Indus Technical & Financial Consultants Ltd. Prowess 1.15 98.26 0 14.56 9. ORG Informatics Ltd. (Seg) Prowess 13.61 77.02 1 2.78 10. Rites Ltd. (Seg) Prowess 353.13 84.43 3.49 25.77 11. Technicom Chemie (India) Ltd. Prowess 1.97 94.42 0 7.32 12. Vapi Waste & Effluent Mgmt. Co. Ltd. Prowess 19.9 79.85 0 18.53 13. WAPCOS Ltd. Capitaline 81.97 97.55 0 40.37 Average 20.04 The TPO adopted 20.04% mean margin of the aforementioned 13 comparables as against 14.25% shown by the assessee and an addition of Rs. 13,16,756/- was worked out on account of international transaction relating to provision of promotion and marketing services. 4. It is the case of Ld. AR that in subsequent year Ld. TPO himself has accepted the submission of the assessee regarding exclusion of Choksi Laboratory Ltd., Genins India, ICRA Management, IDC India,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....%. The assessee has adopted the following methodology for determining the ALP of this transaction. The Assessee had adopted overall TNMM. PLI is the Operating Profit/Operating cost (OP/OC) The assessee is the tested party 17 companies were adopted as comparables. The assessee has earned a PLI of 14.74%, as against the Arithmetic Mean PLI of the 17 comparables of 14.82% reported in the TP report. A show case was issued to the assessee on 22nd October 2012, wherein the assessee was asked to show cause why the ALP of these professional services should not be treated as Nil as the assessee has failed to furnish evidence to prove that the services were requested by the assessee, that services were actually rendered and the payment was at market rate. In response to the same, the assessee filed a submission on 29th October, 2012. Amongst other arguments, the major argument taken by the assessee was that these expenses form part of cost base on which it earns a markup of 14.5%. I have carefully perused the contentions of the assessee and have found that same does not hold good in the assessee's case. Further, the asse....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 5% range 19.96 19.96 19.96 19.96 Thus it was pleaded by Ld. AR that appropriate relief should be granted to the assessee in respect of Ground No.11 & 12. 5. However, Ld. DR relied upon the order passed by TPO and DRP. 6. We have heard both the parties and their contentions have carefully been considered. A query was raised by TPO in the proceeding for A.Y 2009-10 that why the comparables taken in respect of A.Y 2008-09 should not be adopted for this year as well. In reply the assessee submitted a letter dated 18/9/2012 and it was pleaded that none of the comparables adopted for A.Y 2008-09 could be adopted for the reasons given in the chart and such submissions of the assessee has been accepted by TPO in assessment year 2009-10. In the present proceedings it is the case of Ld. AR that even if one out of three comparables namely Rites Ltd, Vapi Waste & Effluent Management Company Ltd. and WAPCOS Ltd. are excluded then the assessee's case will be within safe harbour. It was also the request of the Ld. AR that the issue raised by the assessee may be decided on that basis only. Keeping in view such request of Ld. AR, we consider it just and pro....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... ending 31/3/2008 and the mark up range charged by other group companies the PJDA for provision of similar services fall between range of 2 to 10% for the similar period. Thus it was claimed that assessee's mark up percentage is higher than that earned by its group companies. It was submitted that the said mark up was in accordance with the agreement of the assessee with its AE. Copy of agreement was also filed. It was submitted that it is merely a reimbursement with a mark up of 14.5% and the revenue in this regard has been credited to the P&L Account. Thus it was submitted that Ld. TPO was wrong in determining the ALP of this transaction at nil. Ld. AR in this regard also referred to financials where appropriate entries were made and depicted. Copy of these documents were also given to Ld. DR. Reference was also made to copy of invoices which has been field at page 509 of the paper book, vide which the bill has been raised against the assessee by Platinum Guild International and the charges pertains to consultancy services provided by Mr. James Courage to PGI India during July to December 2007 and total was stated at 5638.98 UK Pounds which include a mark up of 6.5%. Reference wa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t of tax deducted at source on payment of professional fees of Rs. 196,050 to a non resident without appreciating the fact that the professional fees of Rs. 196,050 has been suo-moto disallowed by the appellant under section 40(a)(ia) of the Act." 12. This issue is discussed by Ld.TPO in para 4 of his order. From the audit report it was noticed that assessee did not deduct a sum of Rs. 33,319/- on non[1] resident professional fees. Therefore, the said amount was added to the income of the assessee. Against this it is the case of the assessee that aforementioned TDS amount relates to professional fees of Rs. 1,96,050/- and reference in this regard was made to Annexure-6 added to the financials. This amount is professional fees paid to a non resident. The assessee did not deduct tax, therefore, assessee on its own disallowed entire sum of Rs. 1,96,050/- in the computation of income, copy of which is filed at page 511 of the paper book. It was also seen that in the assessment order the AO has adopted computation of income shown in the return filed by the assessee which is a sum of Rs. 1,19,45,940/-. It was further pointed out that at page 39 of the paper book a sum of Rs. ....