TaxTMI 
TaxTMI 
TaxTMI 
2018 (1) TMI 1547
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....ts return of income on, 29/11/2011 declaring income of Rs. 2.21 crores. During the assessment proceedings, the AO found that assessee has entered into International Transactions (IT.s) with its Associated Enterprise(AE). He made a reference to the Transfer Pricing Officer (TPO) to determine the Arm's Length Price (ALP) of the IT. s entered into by the assessee. After considering the order of the TPO he issued a draft order to the assessee proposing adjustment of Rs. 5.77 crores. The assessee filed objections before the DRP. As stated earlier, the AO passed the order u/s. 143 (3) r. w. s. 144C of the Act. ITA 1053/Mum/2017, AY. 2012-13: 2. Effective ground of appeal, raised by the assessee, is about upward adjustment of Rs. 5.77 crores to the total income of the assessee. During the Transfer Pricing (TP) proceedings the TPO found that assessee had entered into following IT.sn with its AE's : SN. Nature of Transaction Amount (Rs. ) Method used 1. Provision of other support services related to ship management 21,87,18,982 TNMM 2. Provision of technical management and related services 80,48,057 CUP 3. Reimbursement of expenses 16,81,072 At Actuals 2....
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.... discussed above) B 19,86,77,688 Operating Profit C=A-B 1,98,67,839 OP / Operating Cost (as discussed above) D=C/B*100 10% Arm's length margin E 39.08% Arm's length income F 27,63,20,929/- Adjustment G=F-A 5,77,75,402/- Thus, he recommended an upward adjustment of Rs. 5,77,75, 402/- to the total income of the assessee. 3. Before the DRP, the assessee made elaborate submissions. After considering the available material, the DRP held that the TPO had given detailed reason for rejection of comparables selected by the assessee, that he had given proper opportunity to the assessee to offer its comments on the comparable selected by him, that the objections of the TPO were mainly on the selection of final set of comparables for which he had given detailed reasons. With regard to Arcadia Shipping Ltd (ASL), the DRP held that it was providing services including shipping agency, liner-operations, ship-broking, ship-chartering, Project-cargo/coastal-cargo-movements, Off -shore activities in oil and gas sector, chartering of ships like barges/vessels, transportation of offshore structures, that the TPO had rejected the comparable holding that services rendered by ASL were ....
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....ot applicable to income tax proceedings, that HSCC was a good comparable, that HSCC should not be excluded only because it was a Govt. enterprise. He relied upon the cases of Vishay Components India Pvt. Ltd. (ITA 133/PN/2011, A. Y. 2006-07, dated 25/05/2012 & Rampgreen Solutions P. Ltd. (377 ITR 533). 5. We have heard the rival submissions and produce the material before us. We find that the assessee had selected final set of six comparables to determine ALP of the IT. s entered into it during the year under consideration, that the AO had rejected all the comparables selected by the assessee, that he held that HSCC was valid comparable to benchmark the transactions, that the DRP held that one of the comparables selected by the assessee, i.e. ASL, was a valid comparable, that the TPO was justified in holding that HSCC was a good comparable. 5. 1. We find that the issue of inclusion/exclusion of two comparables i. e. ASL and HSCC is key to resolve the dispute before us. First. we will take the matter of ASL. We find that the DRP had held that overall functions of ASL were similar to the activities carried out by the assessee, that some of the activities of comparable were differ....
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....fferences of both the years on record. But, in the case under consideration, there is nothing that could justify the exclusion of ASL as a valid comparable. The TPO has tried to distinguish the services rendered by ASL. But, in our opinion the overall performance of both the companies are same. Therefore, we are of the opinion that there is no need to interfere with the order of the DRP, as far as inclusion of ASL comparable is concerned. Upholding the order of the DRP, we hold that ASL is a valid comparable. 6. We find that HSCC is rendering comprehensive range of high-end professional consultancy services in the areas of healthcare in India as well as abroad. The assessee is involved in various services under the heads payroll arrangements, pension, insurance for the crew. It is true that it also recruits engineers. But, if we compare functionality of both the entities, it becomes clear that they are not in the similar areas of activities. HSCC is earning consultancy fee, as per financials of the company. 70% of the total fee is received by it, on placement of supply order. Balance 30% of total fee is received by HSCC on receipt of supply/installation of equipments. It is also ....