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TaxTMI 
TaxTMI 
TaxTMI 
2019 (11) TMI 1075
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....a of stevedoring lighterage, trans-shipment, sea and land transportation and project cargo handling to various clients. It is stated, assessee's business is divided into two segments i.e., road (surface) and sea transportation. In the course of its business, the assessee provided ship broker services to ESML by taking on hire on voyage charter basis from third parties and providing them to ESML on voyage charter on back-to-back basis. It is observed by the Transfer Pricing Officer that during the year under consideration, the assessee has assisted ESML in availing six vessels on voyage charter basis from third party vendors. It is stated that the assessee provides service to ESML relating to assistance in executing the arrangement, negotiation of freight charges and other services for availing vessels on hire charter arrangement from third party vendors. For providing such service to ESML during the year, the assessee received revenue of Rs. 29,17,78,711. In the course of transfer pricing proceedings, the assessee furnished the transfer pricing study report wherein it had bench marked the aforesaid transaction with the AE by adopting TNMM as the most appropriate method with o....
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....E. The transfer pricing adjustment suggested by the Transfer Pricing Officer was added to the income of the assessee while framing the assessment order. Being aggrieved with such addition, the assessee preferred appeal before the first appellate authority. 4. The learned Commissioner (Appeals), after considering the submissions of the assessee, removed one of the comparables i.e., Inmacs Management Service Ltd., from the list of comparables and computed arithmetic mean of the rest of the four comparables @ 16.56%. By applying the revised arithmetic mean of comparables to the operating cost, learned Commissioner (Appeals) determined the arm's length price of the transaction at Rs. 30,93,03,841, which resulted in transfer pricing adjustment of Rs. 1,75,25,130. Being aggrieved with the aforesaid decision of the learned Commissioner (Appeals), both, the assessee and the Revenue are in appeal before the Tribunal. ITA no.791/Mum./2018 Revenue's Appeal 5. The only dispute in this appeal is with regard to exclusion of Inmacs Management Service Ltd. as a comparable. 6. At the outset, the leaned Counsel appearing for the assessee submitted, the tax effect on the amount disput....
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....id in respect of a similar uncontrolled transactions can be considered as a valid CUP to benchmark the transaction with AE. He submitted, in course of proceedings before the Transfer Pricing Officer as well as learned Commissioner (Appeals), the assessee had furnished all evidences in support of the internal CUP available by way of price charged by non-AEs for hiring vessels. He submitted, though, in the transfer pricing study report the assessee had benchmarked the subject transaction by applying TNMM as the most appropriate method, however, it is equally true that the assessee has also carried out an alternative benchmarking under CUP method. He submitted, CUP method being a direct method, if a valid CUP is available it will get precedence over any other method. He submitted, the Transfer Pricing Officer was totally unjustified in rejecting CUP as the most appropriate method on the mistaken reasoning that the assessee itself has rejected it as the most appropriate method. He submitted, contrary to what the Transfer Pricing Officer says, the assessee has actually made an alternative benchmarking applying CUP. He submitted, in assessee's own case for the assessment year 2012-31 as ....
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.... transactions were filed either before the Transfer Pricing Officer or learned Commissioner (Appeals). He submitted, unless the services rendered by non-AEs to the assessee and the assessee to the AEs are similar in all respect, the price charged by the non-AEs to the assessee cannot be considered as internal CUP. 14. We have considered rival submissions and perused the material on record. We have also applied our mind to the decisions relied upon. Undisputedly, for providing support/broker service to ESML, the assessee has hired six vessels on voyage charter basis from third party vendors and provided / hired them to its AE ESML on voyage charter basis. The Transfer Pricing Officer himself has admitted that the hiring of vessels by third party vendors to the assessee and by the assessee to the AE is on back-to-back basis. No doubt, in the transfer pricing study report, the assessee has given precedence to TNMM as the most appropriate method in comparison to CUP method. The reason being, neither the assessee has provided same or similar service to third parties, nor the AE has entered into same or similar transaction with independent service provider and further, there is no ....
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....e transaction. Of course, assessee's case stands on a much better footing as in the transfer pricing study report, the assessee has also provided an alternative benchmarking applying CUP method. If the assessee applies a wrong method, it is open for him as well as the Transfer Pricing Officer to benchmark the transaction by applying a more appropriate method. In fact, in a number of cases we have noticed that the method adopted by the assessee in transfer pricing study report having found to be unsuitable / inappropriate, the Transfer Pricing Officer rejects such method and applies a more suitable method to benchmark the transaction. Therefore, the method applied by the assessee to benchmark the transaction in the transfer pricing study report cannot be considered to be sacrosanct as one has to analyse the nature of transaction and the available data to apply a particular method as the most appropriate method as provided under section 92C r/w rule 10B. The decisions relied upon by the learned Authorised Representative also support this view. It is also relevant to observe, in assessee's own case in assessment year 2012-13, the Transfer Pricing Officer in order dated 28th January 20....
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....g (I) Pvt. Ltd. v/s ACIT, ITA no.7549/Del./2017, dated 14th May 2018. 18. The learned Departmental Representative strongly relying upon the observations of the Transfer Pricing Officer and learned Commissioner (Appeals) submitted the assessee company being functionally similar to the assessee has been correctly selected as a comparable. 19. We have considered rival submissions and perused the material on record. From the website extracts of the company as submitted before us, it is noticed that the company provides services relating to DGFT, customs / excise duty and service tax. It also appears from the facts on record that the company is engaged in the business of trading in digital certificate. Considering the aforesaid factor, the Co-ordinate Bench in Li & Fung (I) Pvt. Ltd. (supra) has held that the company is not a comparable to a business support service provider. It is also relevant to observe, while excluding this company the Bench also took note of the fact that the finanacial statements of the company were not available in the public domain when the company was selected as a comparable. Before us also, the learned Authorised Representative has specifically submitte....