TaxTMI 
TaxTMI 
2016 (4) TMI 1354
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....at the amount involved in the transaction was of Rs. 26. 34 crores under the head provision of marketing and other support system. He made a reference under section 92CA(1) of the Act to the Transfer Pricing Officer(TPO) to determine the Arm's Length Price(ALP) with reference to the international transactions. The TPO found that the assessee had adopted the TNMM for determining the ALP, that the Profit Level Indicator (PLI) was the Operating Profit to Operating Cost (OP/TC), that six companies were identified as comparable in India data base, that the PLI of the assessee was 10. 14% as against the arithmetic mean of six comparables companies at 14. 62%. During the TP proceedings, the assessee was asked to update the PLI of the comparables for the financial year 2007-08 only, as in the TP report weighted average PLI based on multiple year was computed. Accordingly, the assessee submitted the updated single year PLI of the comparables. The TPO further directed it to exclude the comparables by applying filter of turnover exceeding 200 crores, since the assessee's turnover was only Rs. 26. 34 crores. The assessee excluded one comparable from the set of six companies. As per the TPO i....
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....was a direct influence of the previous year's figure on the profitability of the year under consideration, that in the case under appeal no such influence or correlation was found, that assessee was engaged in providing scientific and other information regarding Roche Pharma Products to medical fraternity hospitals and was providing marketing support services from sales of Roche Pharma Products in India, that the TPO had selected the comparables keeping in view those function of the assessee, that the arithmetical mean margin of those companies was 22. 24% against the assessee's margin of 10. 14%, that the exact match of the assessee for comparability are not easy to get, that TNMM was a residue method and it was more broad-based, that the comparables were taken from companies which were more or less in the similar line of business, that the CUP method could not be applied in the assessee's case, that the search of the TPO was scientific, technically sound and correct, that the action of the TPO was justified, that the final set of comparables picked up by the TPO included five comparables of the assessee. Finally, the DRP upheld the order of the TPO. 4. During the course of heari....
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.... objected by the assessee. First of them is Choksi Laboratories Ltd. In the case of Nortel Networks India (P. )Ltd. (164TTJ21-AY. s. 2007-08 and 2008-09)the Tribunal had held that Choksi Laboratories was engaged in engineering activities. In the case of Yum!Restaurant(India) (P) Ltd. (48 Taxmann. com 384- AY. 2008-09), the Tribunal held that Choksi Laboratories was engaged in chemical testing services. Similarly in the matter of Ciena India Pvt. Ltd. (ITA/3324/DL/2013-AY. -2008-09)it was held that Choksi Laboratories was engaged in providing testing services for various products and was also offering services in the field of pollution-control. Here, we would like to mention that the AO, in his order, dated 24/09/2012, has mentioned that during the year under consideration, the assessee was engaged in 'providing marketing and other support services to its AE'. In our opinion, Choksi Laboratories cannot be treated as a valid comparable as far as assessee is concerned. In the cases of practice advisors private limited (36 Taxmann. com 320, AY. 2008-09) Novartis Healthcare Private Limited(ITA/7643/M/2012-AY. 2008-09)and Cisco Systems (India) (P. ) Ltd. (37 ITR, Trib -133, AY. 2009-10)v....
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....B, the company was engaged in hire purchase, leasing, bill discounting, money changing, travel agency. The last comparable, objected by the assessee is Senco Trance Ltd. On perusal of the director's report it is found that the assessee was engaged in the business of Container Freight Station (pg. 597of the PB), that the income from operations of the assessee comprised of handling charges, equipment, warehousing charges and agency and other charges. Under the head disclosure under segment reporting the assessee had stated that company is principally engaged in a single business segment viz. customs clearing and forwarding, container freight station and related activities (pg. 614 of the pb). In our opinion, there is no need to hold that Senco Trance Ltd. is functionally different from the work done by the assessee. If all the above six comparables are removed from the list than the assessee falls within the prescribed limit of +/-5%. In our opinion, for determining ALP the TPO should identify the identical or almost identical services/ business/products. It is rightly said that a mango cannot be compared with an apple though both grow on trees and both are fruits. Provisions of se....