TaxTMI 
TaxTMI 
2018 (8) TMI 126
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.... considered the facts in A.Y 2011-12. 4. Briefly stated, the facts of the case are that the assessee is a part of Converse Group and a subsidiary of Converse Network Systems Europe BV, incorporated in July 1999 and functions as a service provider. The assessee is engaged in providing value added support services in the nature of sales and post sales support services related to Converse telecommunication products and is also engaged in providing software development, maintenance and professional services to its Associated Enterprises [AEs]. The assessee is remunerated on cost plus basis. 5. During the year under consideration, the assessee entered into the following transactions with its AEs : No. Nature of transaction Method Value of transaction 1. Provision of sales and post sales support services TNMM 16,00,94,357 2. Provision of software development services TNMM 2,26,13,270 3. Provision of professional services TNMM 15,14,77,399 4. Provision of maintenance services TNMM 2,34,39,567, 5. Availing of support services TNMM 3,86,61,387 6. Availing of management services TNMM 4,66,52,153 7. ....
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....e. 3. Reject sick companies. This is not an appropriate filter. The correct filter is to reject companies having negative net worth. 4. Reject companies having insufficient descriptive information The filter is an appropriate filter. However the same has not been correctly applied as the function of comparables have not been correctly analysed in the TP report. 5. Reject companies having non comparable functions This filter has not been applied properly. 6. Reject companies having non comparable services This filter has not been applied properly. 7. Reject companies having Insufficient segmental information This is not an appropriate filter as the segmental information is available from the annual statements. 8. Reject companies that have significant related party transactions. The filter is an appropriate filter. However, the threshold to be applied is rejecting companies having RPT>25%. 9. Reject companies that have been repeated If the filter is meant to exclude only the duplicate company, the same is an appropriate filter otherwise it is not an appropriate filter as it will exclud....
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....the threshold has been upheld in recent judicial pronouncements. Therefore, there is no need to deviate from the limit of 25% (vi) Reject companies that are functionally different" 10. Based on the above reasoning given for filters, the TPO proceeded by examining the comparables used by the assessee. The TPO at para 13 of his order observed that all four comparables used by the assessee are functionally different. After rejecting the comparables used by the assessee, the TPO proceeded by taking the following comparables for bench marking technical support services: No. Company Name OP/OC(%) 1 Kitco Limited 27.48 2 Ashok Leyland Project Services Ltd. 24.70 3 Bengal S R EI Infrastructure Devp. Ltd 42.14 4 Certification Engineers International Ltd. 78.45 5 Global Procurement Consultants Ltd. 30.86 6 H S C C (India) Ltd. 21.04 7 Indus Technical & Financial Consultants Ltd. 14.78 8 Mahindra Consulting Engineers Ltd. 30.92 9 Mitcon Consultancy & Engg. Services Ltd. 40.19 10 Pallavan Transport Consultancy Services Ltd. 25.59 11 ....
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....bles used by the assessee have to be considered. It is the say of the ld. DR that if the TNMM is used at entity basis, then all the services qualify as comparable. At this stage, the ld. Counsel drew out attention to the decision of the coordinate bench in assessee's own case in A.Y 2008-09 in ITA No. 6334/DEL/2012 wherein the findings read as under: "6. We find that in view of our direction to exclude the comparables chosen the TPO and one comparable chosen by the assessee as well as exclusion of the remaining two comparables by the TPO not challenged by the assessee before us, has left with no comparable in the sales and post sale support segment for determination of arm's length price. In view of the above facts and circumstances, we restore the matter to the TPO for carrying out a fresh search and selection of comparables having functions similarity to the segment of sales and post sales support and compute the adjustment accordingly as per law. Needless to mention that the assessee shall be provided sufficient opportunity of hearing." 17. We find that the facts of the year under consideration appear to be similar to the facts of A.Y 2008-09. In our considered o....