TaxTMI 
TaxTMI 
2016 (4) TMI 1178
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....nable in law and on facts for the various reasons and not limited to the following: - 3.1. The TPO as well as the DRP and consequently the AO have grossly erred in law and on facts and in the circumstances of the case in erroneously: 3.1.1. Rejecting the scientifically run search process of the assessee without cogent reason. 3.1.2. Rejecting the search process of the assesse was bad in law in view of the facts the final set of comparables of the Ld. TPO had 5 of the originally chosen comparables by the assesse. 3.1.3. Carrying out a new search process based on erroneous filters 3.1.4. Cherry Picking the comparables 3.2. The TPO as well as the DRP and consequently the AO have grossly erred in law and on facts and in the circumstances of the case for the choice of comparable companies by erroneously: 3.2.1. Determining the ALP of the international transactions of the assessee related to project management services (PMS), marketing support services (MSS) and corporate services that are support services in nature by treating and comparing them to high-end technical services, which is not in line with Rule 10B(2)(b), such t....
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...., nor any default according to law by the assessee. 7. That the interest charged u/s Sec 234B and 234C of the Act is on wholly illegal and untenable grounds and is prayed not to be upheld." 3. Brief facts of the case is that the assessee is a global company operating in the civil aerospace, defence, marine and energy markets with facilities in 14 countries. Its core gas turbine technology has created one of the broadcast product ranges of aero engines in the world with 54,000 engines in service with 600 airlines, 4000 corporate and utility operators and more than 160 armed forces, powering bot fixed wing and rotary aircraft. In addition more than 70 navies use Rolls-Royce propulsion. Rolls-Royce International Limited, UK (RRIL) is a private limited company registered in the United Kingdom. It is engaged in formation of policies and strategies for the development of business opportunities in specific countries and provides marketing, research and commercial information service to its associated enterprises. Rolls-Royce India Pvt. Ltd. A subsidiary of Rolls-Royce Overseas Holding Limited, operates in India primarily in the power generation and oil and gas markets, with a ....
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....nsactions. Ld. TPO on examination out of 13 comparables selected by the assessee rejected 8 comparables on various factors and updated search further selected and retained in final analysis total of 19 comparables whose average PLI is 27.46% and computed arm's length price of Rs. 384455373/- against priced charged by the assessee of Rs. 333193056/- and proposed an adjustment of Rs. 51262317/-. Consequently draft assessment order dated 12.02.2015 was framed which was challenged before DRP by filing an objection on 09.04.2015. Ld. DRP held that the service segment of the assessee includes mix of technical, project management and marketing support services. Therefore it cannot be said that all the services provided by the assessee are very high end services. On this observation it directed to include one comparable and further with respect to 8 comparables included by TPO it directed to exclude 3 comparables selected by TPO and retained 5 further comparables selected by TPO. It further directed to rectify arithmetic error in computing margins of2 comparables i.e. Ashok Leyland and HSCC.In finality 17 comparables remained which has average PLI of 22.56% and the ALP was determined at 36....
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....t routine services in the form of passive business support but rendering market support services. On perusal of the marketing services the assessee provide services such as maintenance of client relationship, identification of new clients, assistance in formulation of market and business strategy and coordination with respect to customer compliant services. On going through the order of TPO wherein a show cause notice dated 23.12.2014 we do not find in para no.4 a single word which shows that the assessee is asked to show cause at any point that assessee is not a low risk or non -risk bearing service provider. In para no.6 of the order of the TPO at page No.12 that various services provided by the assessee are not routine services but rendering market support services. This observation has not been substantiated by TPO how it changes the risk profile of the assessee which remains undisputed. Ld. DR also could not point out that what are the changes in the risk profile mentioned by the assessee and which has also been considered by coordinate bench comparable to this year. In view of this we respectfully following the decision of the coordinate bench hold that assessee is low risk/ ....
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....s, Fine chemicals & Chemicals, Cosmetics, Pharmaceutical s, Industrial Explosives & Waste acid recovery. Hence highly technical. See profile on PB Pg.263-266. Also approved under the Software Technology Park scheme of the Gol as a 100% EOU. M/s Verizon (India) Pvt. Ltd. Vs JCIT [ITA No:4187/Del/2010], Engineering consultancy activity, given the complexity of the function coupled -with the technical expertise required in providing engineering consultancy, the same activity cannot be considered comparable to function of providing marketing support services due to functional differences, differences in industry and difference in market dynamics, Actis Advisers Pvt. Ltd. vs Addl. Commissioner of Income Tax [TS-181 -ITAT-2013-DEL-TP]Covered by ratio of ITAT order for AY 2010-11. 5. Mahindra Consulting Engineers Ltd. Mahindra Consulting has been focusing on engineering consulting services on the thrust areas of infrastructure. MACE of engaged in providing infrastructure engineering consulting services including basic/preliminary engineering, detailed engineering, project management services to various sectors. Hence highly technical. See profi....
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..... On the same basis of functionally difference between rendering support services and running and operating an infotainment network channel, the comparable MMTV should also be rejected as functionally different as per Rule 10B(2). 9. Ashok Leyland Project Services Ltd. The company assists investment entities of the group in successfully identifying and implementing projects in India, provides specialized inputs to assist in the profitable and economic implementation of projects, provides negotiated equity on behalf of Hinduja Group as a commitment to the sustained result of its services etc. Hence highly technical. See profile on PBPg.283 Engaged in financial servicesector, Functionally different from the assessee as per Rule 10B(2) 10. H S C C (India) Ltd. HSCC India Ltd is a Government of India enterprise set up in 1983 with an authorised capital of Rs. 20 million, HSCC is one of the few organisation in South East Asia, rendering comprehensive range of professional consultancy services in health-care and other social sectors, in India and abroad The services of HSCC's being government of India enterprise, have been utilize....
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....e formal or in writing) of the transactions which lay down explicitly or implicitly how the responsibilities, risks and benefits are to be divided between the respective parties to the transactions; (d) conditions prevailing in the markets in which the respective parties to the transactions operate, including the geographical location and size of the markets, the laws and Government orders in force, costs of labour and capital in the markets, overall economic development and level of competition and whether the markets are wholesale or retail." Therefore it may so happen that a comparable company engaged in the similar business which is having the similar FAR may be generally included though same might have been held to be not includible by the courts in some other cases. Further the contractual terms as well as host of other factors stated in above sub rule may determine the comparability analysis. If the difference arising on comparability analysis does not affect the price or profitability of comparable or if so it can be reasonably adjusted same should be taken as good comparable for the Comparability analysis. Therefore it cannot be ever assumed that if a comparable is held....
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....or priority sector lending and toentrepreneurs in the 5MB Sector by way of preparation ofProject Reports & Market Studies and conducting trainingprogrammes for entrepreneurship development. Subsequentlysimilar TCOs were set up in almost all the states with one of theNational Financial Institutions (IDBI, IFCI or ICICI) as theprime shareholder. 3. KITCO has successfully implemented projects likeCochin International Airport Ltd., Titanium Sponge Project,International Marina, Cochin Special Economic Zone, etc andpresently implementing a multimodal Mobility Hub at Cochin,all of which are first of its kind in the country in their ownrespect. KITCO has successfully completed the Phase-1 ofCIAL Golf Course & Country Club and Ghallah WentworthGolf Course at Muscat, Sultanate of Oman, thereby establishingitself in an area, which was considered to be the forte ofEuropean Consultants. The prestigious overseas assignments KITCO so far has completed include the technical evaluation ofelectrical power distribution network at King Abdul AzizInternational Airport, Jeddah. 4. All its clients are either central government, stategovernment, PSU etc. Snapshot enclosed. 5. It....
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....antiate that this company is functionally not comparable with the assessee. Further the reasons that assessee is a registered as 100% EOU cannot be the reason for exclusion of a comparable as a registration of comparable as 100% EOU only gives it benefit with respect to indirect and direct taxation and nothing else. It does not change the functional profile of the comparable. Further even if it has impacted the prices charged by the comparable same is required to be shown that what is its impact on the PLI of the comparable. Therefore merely on this ground this comparable cannot be rejected. Before ld. DRP assessee has submitted that it has significant intangibles however, no details demonstrating this fact has been produced before us and therefore we set aside this comparable to the file of ld. TPO for verification and adjudicating on this ground only. 19. The next comparable is Mahindra Consulting Engineers which is said to be highly technical. The functional profile is placed at page no.271, 272 of the Paper Book and objections before the ld. TPO at page 187 and 188 of the Paper Book. The TPO has selected this comparable stating that the company has single reportable segment ....
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....ebsites such as naukri.com, 99 acre.com etc.Therefore this company is functionally different as it is providing an advertisement space as well as online portal based on subscription by the buyer and seller of the services compared to services provided by the assessee of marketing support services . In view of this we direct ld. TPO for exclusion of this comparable. 22. The next comparable is MMTV Ltd. Which is a Malayalam Language News Channel having presence in print media, radio and online television. Its main income is advertising income. Ld. TPO and DRP rejected the contention of the assessee. We have carefully considered the rival contentions and note that this company is engaged in running a news channel and also publish a daily magazine and main source of income of the comparable is advertising revenue. The functional profile of the assessee as well as the comparable are of diverse nature and therefore we direct for exclusion of this comparable. 23. The next comparable is Ashok Leyland Project Services Ltd. This company is included by TPO and before TPO assessee did not object regarding inclusion of the same. We have perused letter dated 19.01.2015 placed at page no.17....
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....see has contended that as it has been held by coordinate bench in AY 2010-11 in the case of the appellant that assessee is a risk free service providing entity and while the comparables proposed by TPO are providing high end technical services. This comparables assumes risk other than normal risk of business of providing marketing support services. In nutshell his argument was that in the selected and retained comparables the PLI should be adjusted according to the risk assumed by those comparables. Ld. DR relied on the orders of lower authorities and submitted that though risk adjustments should be made however, the information should be forthcoming from the assessee. We have carefully considered the rival contentions and fully agree with the contention of the ld. AR that an adjustment should be allowed to the assessee of the difference in the risk borne by the assessee as well as the comparables. Before us assessee has submitted a working which is based on market rate of return of 12.26% used by the TPO while granting working capital adjustment compared with 7.57% rate of return for Indian treasury bills. Based on this working assessee has computed the risk adjustment as under:- ....