TaxTMI 
TaxTMI 
2018 (6) TMI 1226
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....anch office provides the services like representation services to associated enterprises, carrying out market research work and sharing market related information with AEs and logistic support to AEs for supply of goods to other countries, apart from rendering services in respect of the operations in Nepal and Bangladesh. Since the services rendered in respect of the Indian operations are closely linked with the trading operations of the assessee, the same has been aggregated vide trading segment for the purpose of benchmarking analysis. In consideration of the provision of these services, the PMSI India was remunerated on a cost plus basis, whereby the entire cost incurred by PMSI India in relation with provision of services is reimbursed along with a markup of 5%. 3. For the assessment year 2009-10 the assessee filed their return of income on 30/09/2009 declaring an income of Rs. 3,68,11,639/-and revised the same on 26/03/2010 declaring an income of Rs. 3,69,92,315/-offering interest expense of Rs. 1,80,676/-. Since the assessee was carrying out international transactions with its associate enterprises, the matter was referred to transfer Pricing Officer (TPO) for examining th....
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....td, Killik Agencies and Marketing Ltd and TSR Darashaw Ltd, on the grounds of difference in business structures and functionally not comparable. However, when the assessee raised all these objections before the Ld. DRP, Ld. DRP by way of impugned order turned down the objections of the assessee and held that these five companies are good comparables with the assessee. Hence the assessee is before us in this appeal mainly challenging the inclusion of these five companies and also the disallowance under section 40(a)(i) of the Act. Now we shall proceed to deal the question of comparable tea of these companies with assessee with reference to the submissions on either side and the material placed on record. Apitco Ltd., 9. Assessee objected the included of this company on the ground that this company provides high-end services, diversified activities which includes asset reconstruction and management services, projects related services, like a enterprises development, infrastructure planning and allotment, research studies and tourism, skilled allotment, and adornment management, and entrepreneur development and training, clustere allotment, energy-related services, emerging area....
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....der. The annual report further reveals that this company is engaged in providing high-end technical services also. 14. Ld. AR brought to our notice that they Apitco Ltd., was rejected by a catena of decisions rendered by different Benches of this Tribunal including a coordinate Bench of this Tribunal in Ciena India (P) Ltd vs. DCIT in ITA No. 2948 and 3224/del/2013 following which in Avaya India private limited versus DCIT in ITA No. 146/del/2013. He also placed reliance on the nation reported in Kobelco Cranes India Private Limited vs. ITO in ITA No. 802/del/2016. In international SOS services India private limited versus DCIT ITA No. 1631/del/2014 this company was excluded on account of being hundred percent government organisation and the appeal against this decision of the tribunal was dismissed by the Hon'ble jurisdictional High Court.. Further it could be seen in Vestegaard Asia private limited verses DCIT in ITA No. 6670/del/2015 and H & M Mouritz India private limited verses DCIT in ITA 282/bankg/2015 it is held that the Apitco Ltd., is not a good comparable with any company rendering business support services on the ground that this company is a public sector undertakin....
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....splits, buybacks etc. Per contra, it is the submission of the Ld. DR that a study of the highlighted portions in the profile of the company extracted in the order of the Ld. TPO reveals that the activities of the company or in the nature of business services which are outsourcing will companies in India, as such this company is a good comparable to the assessee, inasmuch as AEs of the assessee also outsource some of their services to the assessee. By placing reliance on the order of the Ld. TPO, he further submitted that as rightly pointed out by the Ld. TPO the comparison has to be with a company which is providing services by dealing in the domestic market and not towards his clients in form of call centres and other outsourcing services catering to foreign customers. The beneficiary in both cases is a foreign client, but the difference is that in one case the services are being provided entirely in local market and in the case of ITES companies services are being provided by interacting with foreign clients are customers of foreign clients on day to day basis. ITES companies have the advantage of location savings why the business service companies do not have the advantage and s....
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....provided in their website. Further it was submitted that the Annual Report of the Global Procurement Consultants Ltd., gives overview of its activities and the relevant information was that the Global Procurement Consultants Ltd., was established primarily to bridge the gap in the professional procurement and management services and to provide comprehensive management services required by the government departments or their project execution agencies to carry out procurement in a time bound energy-efficient manner within the framework of government regulations and guidelines of international institutions. The website further states that the training and capacity building in the institutional aspects of procurement management forms an integral part of these activities, besides which, the consortium base of Global Procurement Consultants Ltd., ensures that all major sectors of the economy including Health, Education, Urban and Rural Development are covered. 24. Ld. TPO, however, opined that the Global Procurement Consultants Ltd., is into the activity of providing procurement management services to government departments and their project execution agencies, and inasmuch as the pr....
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.... of this Tribunal excluded this Global Procurement Consultants Ltd., as a good comparable to the marketing support service providers on the ground of functionality similarity. 28. The profile of this Global Procurement Consultants Ltd., as narrated by the Ld. TPO himself speaks in unequivocal terms that this Global Procurement Consultants Ltd., is a company established by the government to serve the purpose of professional procurement and management services needs and also to provide combines management services required by the government departments or their project execution agencies to carry out the procurement in a time bound and efficient manner within the framework of government regulations and guidelines of international institutions, which is not such a characteristic of the business of the assessee. The business model itself is different, let alone the disproportion is of the financials. We have no hesitation, in the face of the profile of Global Procurement Consultants Ltd., that it is not a good comparable at all to the assessee and for that matter to any private marketing support service provider, as such we direct the Ld. TPO to exclude this company from the list of....
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.... 33. It is brought to our notice that in the case of Parametric Technology India Private Limited, Ld. DRP rejected this Killik Agencies and Marketing Ltd to be a good comparable to the companies engaged in market support services and a Jurisdictional Tribunal that is a Bench of the Bangalore Tribunal upheld such a finding of the Ld. DRP. Further the Bangalore tribunal in the case of DCIT vs. Aruba Networks India Private Limited in ITA-TP 57/bank/2015 found that Killik Agencies and Marketing Ltd is not a marketing support service and it cannot find a place in the set of comparables for such companies. 34. On a perusal of the profile of this Killik Agencies and Marketing Ltd and also the findings of the tribunal on the comparability of this company with the companies rendering market support services, we are of the considered opinion that Killik Agencies and Marketing Ltd cannot be a good comparable to the assessee and is liable to be excluded from the final list of comparables and, accordingly we direct the Ld. TPO to exclude this company from the list of comparables for benchmarking the international transaction of market support services. TSR Darashaw Ltd. 35. This compa....
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....S companies, services are being provided by interacting with foreign clients are customers of foreign clients on day to day basis. He further submitted that ITES companies have the advantage of location savings while the business service companies do not have that advantage and since in the case on hand the services are being provided in India for the predominant business, TSR Darashaw Ltd. is a good comparable with the assessee. 39. On a perusal of record and the Annual Report of TSR Darashaw Ltd. we find that TSR Darashaw Ltd. is mainly into the payroll process outsourcing with a new global payroll ERP application called RAMCO for its payroll business. Further the order of Ld. TPO itself reads that TSR Darashaw Ltd. undertakes the registrar and transfer agent activity functions for equity and preference shares, venture instruments and bonds, commercial paper and private placements. Moreover this company, under this segment also undertakes transfer processing customer/query handling and correspondence split/consolidation/renewal of certificates, processing and distribution of interest to slash dividend warrants, payments by physical warrants/through ECS/director credited. In th....
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....nd inadmissible as the assessee was supposed to deduct tax on such payments but no TDS was made on such payments. Assessee explained that the services were rendered in Bangladesh and there was no business connection of the payee in India and hence this sum is not being chargeable to tax in India, TDS was not done and that no income accruing or arising to the payee in India, as such TDS was not done. 44. Ld. AO, however, held in paragraph No. 5.2 that the "...payments were made for the alleged professional services in Bangladesh. As per section 5 (2) read with section 9 (1) (vii) (c), such payments are made to non-resident for rendering managerial, consultancy or technical services to such nonresidents find their business in India are taxable in India. Such payments are covered under article XXIV of the treaty. Such payments can also be characterised as royalty for imparting of commercial or industrial knowledge and skill in the act as well as DTAA between India and Bangladesh. The assessee has not furnished the copy of Agreement between the assessee and the payee. xxx &nbs....