TaxTMI 
TaxTMI 
2018 (10) TMI 1640
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....g the year read:- Sl. No. Description of transaction Amount in INR Method Used 1. Purchase of Traded Goods 20,928 Transactional Net Margin Method 2. Purchase of fixed assets 7,21,51,740 Transactional Net Margin Method 3. Provision of Services 87,33,97,543 Transactional Net Margin Method 4. Commission Income 39,54,027 Transactional Net Margin Method 5. Reimbursement of expenses paid 36,02,54,953 Transactional Net Margin Method 6. Reimbursement of expenses received 7,02,942 Comparable Uncontrolled Price Method 131,04,82,133 4. The transaction under dispute relates to 'Provision of business support services' amounting to Rs. 87,73,51,570/-. TNMM was taken as the most appropriate method with OP/TC as the PLI. The assessee showed PLI at 18.82% by using following set of comparables:- (i) Cyber Media Events Ltd. (ii) Mahindra Consulting Engineers Ltd., (iii) Wapcos Ltd. (iv) Hindustan Housing Company Ltd., (v) Empire Industries (Trading & Indenting Segment) (vi) Entertainment Network (I) Ltd. (vii) Hansa Vision Pvt. Ltd. (viii) Priya International Ltd. 5. Out of the above comparables, the TPO accepted only Mahindra Con....
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....ar, so that the tested party and the comparables not only have a level playing field, but, are also on the same platform. For this proposition, we derive support from the judgment of the Hon'ble jurisdictional High Court of Delhi in the case of Rampgreen Solutions Pvt. Ltd. (ITA No.102 of 2015). The relevant paragraphs of the judgment read:- "20. In order for the benchmarking studies to be reliable for the purposes of determining the ALP, it would be essential that the entities selected as comparables are functionally similar and are subject to the similar business environment and risks as the tested party. In order to impute an ALP to a controlled transaction, it would be essential to ensure that the instances of uncontrolled entities/transactions selected as comparables are similar in all material aspects that have any bearing on the value or the profitability, as the case may be, of the transaction. Any factor, which has an influence on the PLI, would be material and it would be necessary to ensure that the comparables are also equally subjected to the influence of such factors as the tested party. This would, obviously, include business environment; the nature and functio....
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.... 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 comparables to benchmark the international transaction of the assessee in providing the market support services to its AEs." 14. Again, the Mumbai Bench of the ITAT in M/s Novartis Healthcare Pvt. Ltd. (ITA No.7643/M/2012), has observed as under:- "The Revenue has not disputed that Rites Ltd. is a government company established under the Ministry of Indian Railways and is providing the services....
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....the rival submissions. It is undisputed fact that this company is a public sector undertaking company. Its operations are based on policy requirements of the Government and it is a preferred company of the Govt. of India for entrusting of work and therefore, it totally operates in a controlled environment. Hence, this company cannot be compared with that of the assessee-company, which is a private company operating in uncontrolled business environment. In this regard we rely on the decision of coordinate bench in the case of Delhi Adidas Technical Services (P) Ltd. vs. DCIT (69 taxmann.com)" 16. A similar view was taken by the Tribunal's Mumbai Bench in Chemtex Global Engineers Pvt. Ltd. [ITA No.3590/Mum/2010]. The relevant observations read: "25. Even with regard to the comparable companies which are taken into consideration by the A.O./TPO, the learned CIT(A) has correctly held that Rites Limited is a Government of India enterprise and considering the nature of the contracts and the implicit guarantee provided by the Government of India, etc. Rites Limited cannot be taken as a comparable case and hence the learned CIT(A)was justified in excluding the same." 17. We will now ta....
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.... hence, we direct the A.O./TPO to exclude this company from the final set of comparables. (iv) RITES Ltd. 21. This, again, is a Government of India Undertaking and has the support and backing of the Government. The website of this company indicates that it is a Government of India Undertaking and is engaged in project management consultancy and turnkey project for enhancement of post production facilities. It operates as a multi-disciplinary organization in the fields of transportation, infrastructure and related technologies. The operations of this company are diversified in the field of rail infrastructure, building and airport transportation and economics, technical services, transport infrastructure, urban infrastructure, quality assurance and training. In our considered opinion, this company is functionally dissimilar and, hence, cannot be considered as a good comparable. In addition, as mentioned elsewhere, being a government company, is not in the same platform as the appellant company. We direct for the exclusion of this company. (v) Kitco Ltd. 22. This company is also a government company and has the support and backing of the government. As per the website of this c....