TaxTMI 
TaxTMI 
2016 (10) TMI 1155
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....n Panel ("DRP"). 2. That on the facts and circumstances of the case and in law, the AO/DRP has erred, in upholding the adjustment made by the learned Transfer Pricing Officer ("TPO") of Rs. 36,352,966 on account of business support services rendered by the Appellant to its Associated Enterprises ("AE") alleging that the transactions between the Appellant and its AE were not at arm's length in terms of section 92F(ii) of the Act. 3. That on the facts and circumstances of the case and in law, the AO/DRP/TPO has erred in rejecting the economic analysis undertaken by the Appellant which was in accordance with the provisions of the Act read with the Income-Tax Rules, 1962 ("Rules") for establishing the arm length's price of the international transactions. 4. That on the facts and circumstances of the case and in law, the AO/DRP/TPO has failed to place any material or documents on record to reject the economic analysis conducted by the Appellant and has thereof failed to comply with the provisions laid down in section 92C(3) of the Act. 5. That on the facts and circumstances of the case and in law, the AO/DRP/TPO has erred in considering 'r....
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....hich allows use of multiple year data of comparable companies for the purpose of determination of the arm's length price as defined under section 92F of the Act. 12. That on the facts and circumstances of the case and in law, the AO/DRP/TPO has erred in not allowing the appellant the benefit of 5 percent range as provided in the Proviso to Section 92C of the Act. 13. That on the facts and circumstances of the case and in law, the AO/DRP/TPO has erred, in law and on facts, in charging interest under section 2348, 234C and 234D of the Act." 2. Briefly stated the facts of this case are : the assessee company BG India Energy Pvt. Ltd. (BGIEPL) was incorporated on 24.04.1998 as 99.98% subsidiary of British Gas Asia Pacific Holdings Pte. Ltd. (BGAPH), Singapore, engaged in provision of project support services to various projects promoted by BG Group in India. Assessee company is providing services to British Gas Asia Pacific Holding Pte. Limited (BGAPH) and British Gas Exploration and Production India Limited (BGEPIL). The primary business of the Group is discovery, extraction, transmission, distribution and supply of natural gas to existing and developing marke....
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....made by the assessee. Assessee has also incurred expenses in the nature of salary, relocation, travel and other expense son behalf of the AEs which has been reimbursed by the AEs to the assessee without any markup. TPO has not accepted the provision contained in the Agreement between the assessee and its AEs for not charging markup on alleged reimbursement expenditure. TPO noticed that in such situation, no independent party would provide any services to any third party without any markup. 8. Assessee company furnished updated margin of the comparables at the instance of TPO at 2.86% as against unadjusted margin at 7.78%. 9. On the basis of filters adopted by the TPO, assessee selected 15 comparables, out of which only 3 comparables have been kept in the final set of comparables chosen by the TPO. So, TPO proposed 15 comparables having average margin of 22.24% to work out the TP adjustment. After entertaining detailed objections raised by the assessee company, TPO proceeded to consider 11 comparables having average margin of 20.38%. For working capital adjustment, margin of comparables came to be 18.32% and thereby made adjustment of Rs. 3,72,95,703/-. 10. Assessee company....
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....bles chosen by the assessee company for benchmarking the international transactions on the ground that the comparable company is engaged in high end consultancy services/engineering services whereas assessee company is into providing low end services to its AEs. 16. Assessee company provided the detail of functions performed, available at page 271 of the Paper book, which are as under :- * Assistance in obtaining information regarding industrial and commercial matters and technological developments which interest BG Group Plc, especially in connection with upcoming projects in the oil, gas and energy sector and telecom projects; * Provision of information concerning Indian Government policies regarding trade and industry along with expert technical assessment and evaluation of such developments; * Assistance in the monitoring of the Group's existing assets / investments and ongoing projects in India and identifying and developing suitable business opportunities in India; * Evaluation of prospective customers especially in connection with upcoming upstream projects in India; * Allowing BG Group's employees engaged in vari....
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....EPIL especially in connection with upcoming upstream projects in India. 1.2 Allowing BGEPIL's employees engaged in various project development / allied activities in India to use its facilities during their stay in India. 1.3 Providing services to BGEPIL, which would be in the nature of coordination and support services in relation to BGEPIL's contracts with Indian customers. 1.4 Sharing facilities with the BGEIPL's affiliated operational & project companies in India. 1.5 Providing support services to BGElPL in relation to legal matters. 1.6 Assist BGEPIL in regulatory matters and public affairs/ relations." 21. So far as international transaction relating to "Business Support Service" is concerned, it covers under clause 1.3 of the Agreement (supra) i.e. "Providing services to BGEPIL, which would be in the nature of coordination and support services in relation to BGEPIL's contracts with Indian customers". 22. Ld. AR for the assessee while arguing on Grounds No.7, 8 & 9 restricted his arguments to the issue of erroneous selection of comparables by the TPO. Assessee company sought to exclude 4 comparables viz. Rites....
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....he field of Pollution Control, this is functionally different and relied upon the decision rendered by ITAT, Delhi Bench 'I' in case of Ciena India (P.) Ltd. vs. DCIT - (2015) 57 taxmann.com 329 (Delhi - Trib). Coordinate Bench while deciding the issue of comparability CHOKSI with Ciena India (P.) Ltd. (supra), a business support service provider, observed as under :- "15. The TPO visited the website of this company and noticed that it was engaged in providing 'analysis, calibrations, pollution control and consultancy services' to a broad spectrum of industries. By considering such nature of services provided by this company, the TPO held that these were similar to the services provided by the assessee to its AE. We have gone through the Annual report of this company, which is available on pages 2370 onwards of the paper book. Note no. 8 to Part B - 'Notes forming part of the accounts' - provides that this company is a commercial testing house engaged in testing of various products and also offers services in the field of pollution control as allied activity. Para 2 of the Annexure to the auditor's report also clarifies that this is a company en....
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....rave;-vis appellant in that case who was into providing marketing support services held the same to be functionally different by making following observations :- "As is evident from the description of the 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. The services provided by the Appellant are functionally different vis-à- vis the business operations of TIL, RITES, WAPCOS and TCE." 31. So, in view of the divergent functional profile of the assessee company vis-à-vis comparable company (RITES) and in view of findings returned by the coordinate Bench cited as MCI Com India (P.) Ltd. (supra), we are of the considered view that the RITES cannot be a valid comparable for benchmarking international transaction for assessee company, so the same is ordered to be excluded. WATER & POWER CONSULTANCY SERVICES (INDIA) LTD. (WAPCOS) 32. Assessee company sought to exclu....
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.... and control of BG Group entities but they remained on the payroll of the assessee company, and their salary and relocation expenses were paid by the assessee company, subsequently required form AEs on cost to cost basis. The ld. AR for the assessee further contended that so far as recovery of expat income-tax payment from BGAPH is concerned, the assessee company has paid income-tax payment of the employees of BGAPH working in India amounting to Rs. 4,81,96,554/- as BGAPH has no presence in India and this amount was recovered by the assessee company from BGAPH. 37. TPO while computing the OP/TC for benchmarking international transaction added the amount of reimbursement/ recoveries received by the assessee company form its AE to both the cost and revenue resulting into lowering the margin of the assessee company from 11.30% to 8.24% which is also upheld by the ld. DRP. 38. Perusal of the P&L account statement, available at page 405 of Paper Book-1, shows that expenditure of the assessee company under the head on account of employee cost, general and administrative expenses and depreciation amounting to Rs. 26,19,84,014/- does not include the amount of Rs. 9,47,01,444/- being ....