TaxTMI 
TaxTMI 
2018 (5) TMI 851
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....rvices and other similar auxiliary sale, support/assistance services to its Head office. The assessee reported an international transaction of 'Provision of marketing support services' with transacted value of Rs. 6,43,25,676/- in Form No.3CEB. The Assessing Officer (A.O.) made reference to the Transfer Pricing Officer (TPO) for determining the arm's length price (ALP) of the international transaction. The assessee chose the Transactional Net Margin Method (TNMM) as the most appropriate method with the Profit level indicator (PLI) of Operating Profit/Total Cost. 11 comparables were selected, whose average margin was shown to be less than that of the assessee. The TPO did not dispute the application of TNMM as the most appropriate method and also the PLI of OP/TC. He TPO did not accept the use of multiple-year data by the assessee, which position has not been disputed by the assessee in the appeal before us. All the 11 comparables chosen by the assessee were rejected by the TPO. He chose 14 fresh comparable companies. With the average OP/TC of such comparables at 22.33%, the TPO proposed transfer pricing adjustment of Rs. 1,05,83,368/-. The assessee approached the Dispute Resolution....
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....reement dated 04.09.2012 between the assessee and its Head office pursuant to which such services were rendered. A copy of such Agreement is available on page 454 of the paper book. This Agreement characterizes the nature of services as 'Marketing support services' and provides that the assessee : 'will provide Marketing Support Services and other similar auxiliary sale support services in respect of BFC products'. It has also been mentioned that the assessee : 'shall use its best efforts to support BFC, identify and predict market trends, analyze customer needs, improve customer relations and facilitate the information flow between BFC and its customers'. Clause 2 of the Agreement sets out 'Price for the services.' It provides that : 'The price, which BFC (the head office) shall pay to BFWBO (the assessee) for the Marketing Support Services shall be an amount equal to BFWBO's Cost plus 5% (the 'Profit Margin'). The above narration of facts transpires that the assessee is basically engaged in rendering marketing support services to its Head office, for which it is remunerated at cost plus 5% mark-up. With the above understanding of the nature of services rendered by the assessee an....
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....fit & Loss Account indicates total revenue of Rs. 3,69,94,830/- is from 'Sales and other income.' It is the solitary item reflected on the revenue side of this company. Detail of 'Sales and other income' is available in Schedule I, which indicates figures of Sale at Rs. 10,449/-, Processing charges at Rs. 3,69,13,597/- and Other income at Rs. 70,784/-. It has incurred Manufacturing expenses and also expenses on Material consumed. It is thus palpable that this company is mainly in the Processing business. Per contra, the assessee company is only providing Marketing support services to its Head office, which is quite distinct from that of Hightemp Techmat Pvt. Ltd. We, therefore, order to exclude this company from the list of comparables. (iii) ICRA Management Consulting Services. 11. The TPO included this company by rejecting the assessee's contention of functional dissimilarity. No relief was allowed by the DRP. 12. We have gone through the Annual report of this company, whose copy is available on page 27 onwards of the paper book. Its Director's Report shows that it has completed 650 projects for about 350 clients, and its area of operation extends to a mix of national and int....
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...., this company has reported that it developed the waste management strategy for treatment and disposal of Mumbai's 6000 tons per day of municipal solid waste; it sought approval for revival and implementation of an existing 150 TPD composting plant at Okhla; and DPR for SWM for Nanded Corporation etc. Under the Resource conservation line, it has been mentioned that the company has signed a Memorandum of Understanding with Gujarat State Petroleum Corporation Ltd. for implementing a 100 TPD Integrated Biodiesel project in Gujarat apart from hosting an international conference on the carbon market. Under the 'Information systems' line, the company has reported that it has moved the Environmental Information Centre initiated by the Ministry of Environment and Forests from the pilot phase into a self sustaining entity. Under the Consulting and advisory services line, this company has reported that it is serving Delhi City Development Plan, Sub- City Plan - New Delhi Municipal Corporation, Master Plan for Sabarimala and R&R for Mittal Steel India. Apart from the ostensible differences in the nature of activities carried out by this company vis-à-vis the assessee company, this comp....
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....he management.' Further, this company is in receipt of 'mobilization fee'. In addition, this company has made export sales and is also in providing leasing services. There is no separate segmental information and all the receipts have been classified under the primary segment of 'Consultancy services'. In view of such a diverse nature of services rendered by this company, the same cannot be considered as comparable to the assessee company providing only marketing support services. We, therefore, order to exclude this company from the list of comparables. (viii) Tecnicom-Chemie (India) Pvt. Ltd. 21. The TPO included this company in the list of comparables ignoring the assessee's objection that it was functionally dissimilar. No relief was allowed by the DRP. 22. After considering the rival submissions and perusing the relevant material, we find from the Profit & Loss Account of this company, whose copy is placed on page 184 of the paper book, that its operational income has been classified as 'Commission, Consultancy & Services'. There is no separate segmental information as regards 'Services', which could be considered as comparable to the assessee company. This deciphers that ....
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....t for bringing the case of the assessee at par with other functionally comparable entities. We, therefore, agree in principle with the grant of working capital adjustment. 28. However, we find that there is insufficient material readily available on record for calculating the working capital adjustment in respect of comparables vis-a-vis the assessee. Under such circumstances, we are of the considered opinion that it would be more appropriate if this issue is considered and examined by the original authority. We order accordingly and direct the AO/TPO to compute working capital adjustment, if any, available to the assessee as per law. 29. To sum up, we set aside the impugned order on the issue of addition towards transfer pricing adjustment and remit the matter to the file of AO/TPO for a fresh determination of the ALP of the international transaction of 'Provision of Marketing support services' in consonance with our above directions. Needless to say, the assessee will be allowed a reasonable opportunity of being heard in such fresh proceedings. 30. In the result, the appeal is partly allowed for statistical purposes. A.Y. 2008-09 31. In this appeal the assessee is aggrieved....
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.... against this, the services provided by the assessee are purely in the nature of marketing support to its Head office. We fail to appreciate as to how marketing support services can be equated with testing services. When we peruse Schedule of fixed assets of this company, it can be seen that the major asset is 'Instruments.' It is with the help of these instruments that the company is providing services in the nature of testing of various products. By no standard, this company can be considered as comparable with the assessee company. We, therefore, direct the exclusion of this company from the list of comparables. (ii) WAPCOS Ltd. (Seg.) 36. The TPO considered this company as comparable by observing that it was providing support services in terms of technical support, technical know-how valuation and assistance in development/upgradation of potential suppliers, etc. The assessee's objections about the functional dissimilarity of this company, were rejected. 37. After considering the rival submissions and perusing the relevant material on record, we find from the Annual report of this company that it has two segments, namely, 'Consultancy and engineering projects' and 'Lumpsum ....