TaxTMI 
TaxTMI 
2018 (10) TMI 1640
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....The international transactions reported during 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) Entertainme....
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....nce whether a company is a private company or a government owned company as long as it is functionally similar to the assessee company. 12. To a certain extent we may agree with the DR, but, at the same time, we may have to point out that not only the comparables should be functionally similar, but, the business model should also be similar, 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 ....
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.... are wholesale or retail." 13. The coordinate Bench in the case of Philip Morris Services India S.A. (2018) 95 taxmann.com 156 (Delhi-Trib.) observed as under:- "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 comp....
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....functions and activities performed by the Rites Ltd., we find that this company cannot be regarded as a good comparable for determining the arms length price in respect of the services rendered by the assessee to its AE." 15. The Bangalore Bench of ITAT in KHF Components Pvt. Ltd. [IT (TP) A No.1748/Bang/2013, while deciding the inclusion/exclusion of a Government company, observed as under:- "We have considered 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. Ev....
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.... services and has undertaken several activities for the generation of power during the year. NTPC has also undertaken several rural electrification projects under Rajiv Gandhi Gramin Vidyut Yojana (RGGVY) during the relevant year. It is seen that 87% of its operating revenues are earned from electrification services. Such functions, in addition to being a government company, makes this company functionally dissimilar from the appellant company, 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 as....