TaxTMI 
TaxTMI 
2017 (10) TMI 1488
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....same while determining arm's length price. 3. On the facts and circumstances of the case and in law, the learned TPO erred in treating SVS Marine Services Pvt. Ltd. as not comparable to the Appellant Company and thereby excluding the same while determining arm's length price. 4. On the facts and circumstances of the case and in law, the learned TPO erred in treating Bippy Ship Management (India) Pvt. Ltd. as not comparable to the Appellant Company and thereby excluding the same while determining arm's length price. 5. On the facts and circumstances of the case and in law, the learned TPO erred in treating Ashapura Logistics Pvt. Ltd. as not comparable to the Appellant Company and thereby excluding the same while determining arm's length price. 6. On the facts and circumstances of the case and in law, the learned TPO legally erred in selectively picking Sealion Sparkle Port & Terminal Services (Dahej) Ltd. as comparable for the purpose of determining arm's length price, without following a scientific search process and sharing the said search process with the Appellant Company. 7. On the facts and circumstances of the case and in law, the learned T....
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....irected the AO to consider only Sealion Sparkle Port and Terminal Services (Dahej) Ltd. as suitable comparable to benchmark the international transaction of the assessee for the purpose of computing arm's length price. The AO following the direction of the DRP passed the assessment order u/s 143(3) r.w.s 144C(13) dated 24.02.2016 making an addition of Rs. 1,18,34,132/- as TP adjustment. 4. Aggrieved by the order of the AO, the assessee has filed the present appeal before the Tribunal. The assessee - company is a branch of the British Marine PLC United Kingdom (BMPLCUK). As per the corporate background, BMPLCUK is an international ocean freight transportation group, which operates and manages a portfolio of owned and chartered vessels of Supermax, Handymax and Paramax types. The group is headquartered in London and has offices in Mumbai, New Delhi and Singapore. The assessee is a Ship Management Company which provide management services to all its associated enterprises. It provides operational, personnel, technical services. 4.1 The assessee - company as per its benchmarking report has filed the following five comparable companies: S. No. Name of the Company....
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....s seen in pages 61 to 67 of the paper book. * The TPO has erred in not considering the Director's Report of the Company submitted vide submission dated 28th July 2014, Where in it is stated that the Company is engaged in shipping services as seen in page 66 of the paper book. * Further, it is submitted that the average used is the simple average and not the weighted average, as it appears in the benchmarking report. 2. Five Star Shipping Agency Pvt. Ltd. Reasons for Rejection by TPO * Functionally dissimilar as can be seen from page 30 of the paper book * Applicant failed to clarify whether segmental results are available or not, * Weighted average PLI used to arrive at final PLI. Applicant's Contention * The TPO has erred in functionally comparing the business description of another group company i.e. Five Star Shipping Company Private Limited, with that of the Applicant. This is evident from the website extract as attached in pages 293 to 294 of the paper book. * Further, it is submitted that the average used is the simple average and not the weighted average, as it appears in the benchmarking report. 3. SVS Marine Services Pvt. Ltd. ....
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....s page 295 of the paper book. * The company is presently called 'Ambica Logistics Private Limited' and is earning revenue from ship and technical management fees, as seen in page 166 of the paper book. * Further, it is submitted that the average used is the simple average and not the weighted average, as it appears in the benchmarking report. 4.4 Thereafter, the Ld. counsels have submitted that the comparable selected by the AO is a functionally different company. 1. Sealion Sparkle Port & Services (Dahej) Ltd. Reason for selection given by TPO * Considered functionally similar on the grounds that it is a joint venture between Ocean Sparkle and PSA Marine (PTE) Limited i.e. executing a 12 year contract for provision- of comprehensive port operation, management services. Applicant's Contention Functional Differences *The learned TPO failed to take into consideration the Applicants submission that the company, is an SPV engaged in providing port management services to Petronet LNG as its LNG jetty at Dahej in Gujarat. The contract has a 12 year tenure expiring in December 2015 and includes provision of comprehensive port O&M services, as evidenced ....
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.... Ship Management (India) Pvt. Ltd., the company has been making losses persistently for the FY 2008-09 and FY 2009-10 and the assessee failed to file updated margins for FY 2010-11 and (v) in the case of Ashapura Logistics Pvt. Ltd., it was having functionally dissimilar, diversified business. Thus the Ld. DR submits that the AO has rightly rejected the above five comparables mentioned by the assessee. Further, the Ld. DR submits that though Sealion Sparkle Port and Terminal Services (Dahej) Ltd. is not engaged in ship management, the function is same as it is engaged in port management. In Transactional Net Margin Method (TNMM), the broad functional comparability is required to be seen and not product comparability. The Ld. DR thus supports the order passed by the DRP and the AO. 6. We have heard the rival submissions and perused the relevant materials on record. The obtaining factual matrix has to be tested on the anvil of the following enunciation of law which would resolve the contentious issues in the instant case. (i) Comparability In Rampgreen Solutions Pvt. Ltd. vs. CIT (2015) 377 ITR 0533 (Del.), the Hon'ble Delhi High Court has held that 'C....
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....ibes. In order to analyze comparability of an uncontrolled transaction with an international transaction, data relating to the financial year in which the international transaction or specified domestic transaction has been entered into should be used. Proviso to Rule 10B(4) carves out the exception i.e. data relating to two years prior to such financial year may be considered if such data reveals facts which could have an influence on determination of transfer prices. In Chryscapital Investment Advisors (India) Pvt. Ltd. vs. DCIT (2015) 376 ITR 0183 (Delhi), the Hon'ble Delhi High Court has held that while determining the comparability of transactions, multiple year data can only be included in the manner provided in Rule 10B(4) and thus, it is not open to assessee to rely upon previous year's data as a general rule. (v) Related Party Transactions In CIT v.Thyssen Krupp Industries India (P) Ltd. (2016) 385 ITR 0612 (Bom), the Hon'ble Bombay High Court has held 'applying consistent filter of 25% or less of related party transaction alone shall be considered comparable.' (vi) Segmentation vs. Aggregation In Aztec Software & Technology v. ACIT (294 ITR 32-Bang ITAT), i....