TaxTMI 
TaxTMI 
2021 (3) TMI 69
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....aged in the activities like, import sealing modules and wedges from its AEs; procure frames from local vendors who use the design provided by Roxtec group; and assemble sealing modules and wedges into customised, ready to use packs and sell it to the customers. For the assessment year 2013-14, the assessee company filed its return of income on 30.11.2013 declaring Nil Income with a loss of Rs. 6,08,28,977/-. During the assessment proceedings, learned Assessing Officer found that during the financial year 2012-13, the assessee entered into following International Transactions (ITs): SI. No. Nature of Transaction Value Rs.in Crores Cr.) 1. Import of Material (Semi-Finished and Finished Goods) 8.36 2. Export of finished goods 3.14 3. Provision for Marketing Support services 0.59 Total 12.09 3. In view of the above international transactions, determination of the Arms Length Price ("ALP") was referred to the Transfer Pricing Officer (Ld. TPO), and the Ld. TPO by order dated 25/10/2016 proposed an adjustment of Rs. 3,65,69,055/- to be the arm's length price of the international transaction and the learned Assessing Officer vide draft order dated 7/12/201....
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....ar by year the company is experiencing fall in revenue on account of slowdown in the telecom sector; that the human capital cannot be reduced in the short period of time; that the increase in employee cost in comparison to preceding year is nominal; that considering the fact that the core function of Roxtec India is 'sales and marketing' such reduction was neither advisable. He further submitted that all the employees in the Company have been undertaking general sales and marketing activities, the expenses are in the nature of Rent, Traveling and Conveyance have been incurred, these expenses are normal business expenditure and incurring such expenditure does not lead to an automatic conclusion that Roxtec India is carrying out substantial value addition/production. At best, it is a surmise or assumption made by TPO. 8. Nextly argued that expenses in the nature of advertising and Sales promotion have been incurred, inasmuch as during the year, Roxtec India has incurred INR 35.29 lacs under the head advertising and sales promotions; that these expenses are majorly on account of free samples distributed to the customers. No efforts have been made by the TPO to delve into the ....
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....ture we deem it necessary to look at the observations of the Tribunal in assessees own case for the assessment year 2012-13, and such observations run thus,- 11. The assessee has relied upon the decision of ACIT versus MSS India (private) Ltd. reported at 123 TTJ 657 to support its case. We have carefully considered the facts in that case wherein the method adopted by the assessee was cost plus method and against which the learned transfer pricing officer adopted transactional net margin method. On careful perusal of the facts of that decision, they are distinct from the facts before us. In that case the assessee determine the arm's-length price of its transactions with foreign associates on the basis of cost plus method by offering the comparison of gross profit markup margin on its transactions with unrelated parties which was held to be correct. In that case TPO was held to be not justified in rejecting the method and making an adjustment as per transactional net margin method even if the assessee had suffered loss in those transaction with its associates. In the present case before us the issue is whether the assessee is a distributor or a manufacturer and whether resale ....
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....the facts and circumstances involved in this year are similar to the facts and circumstances for the earlier assessment years, there is no justification for not allowing the same for this particular year. Having regard to this anomalous situation, we are of the considered opinion that the working capital adjustment should have been allowed for this year also. We therefore while answering ground No. 2 in favour of the assessee, direct the learned Assessing Officer/Ld. TPO to allow working capital adjustment to the assessee for this assessment year also. 16. Now coming to ground No. 5 and 6 those relate to the recomputation of the arm's-length price by applying the entity level margins of tested party, instead of the segmental margins in respect of "marketing support services" and also by selecting six new companies why rejecting two companies selected by the assessee for such comparison. 17. According to the assessee, the AE of the assessee makes certain direct sales in India, in respect of which the assessee entered into a contract for providing the marketing support services. The assessee is remunerated at the rate of 15% of the value of sale effected by AE in India. Ld. TPO....
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....ne through the record in the light of submissions made on either side. Insofar as this issue - whether segmental results have to be taken into consideration or profit margin at entity level has to be considered, is concerned, there is no dispute that the assessee has maintained segmental records in relation to the Management Support Services. It is not decipherable from the orders of the authorities below that these segmental records are rejected for any explicit reasons. Ld. TPO adopted the entity level margins of the assessee as well as the comparables. There is no denial as to the submissions of the ld. AR that the segment of Management Support Services is different from other activities performed by the comparables. 20. In M/s. Synverse Mobile Solutions (supra), the Tribunal held that where direct overheads attributable to the respective segments were duly allocated by the assessee to the said segments and even for indirect overheads, allocation was done by applying appropriate allocation keys, in the absence of any objection to the said allocation keys adopted or applied by the assessee, it is not proper for the TPO to resort to the entity level margin comparison of the asses....
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....viding information of potential customers, as and when required, use of advertising and distribution of promotional materials etc. and participating in trade shows and exhibitions, exhibiting and demonstrating the products of the group. So also, the assessee is expected to communicate the requirement of the customers and their feedback to the AE. Further, the assessee is expected to act as a communication channel and facilitate procedural steps such as documentation formalities etc. besides follow up the post sale service for collection of the amount invoiced. The assessee gets remuneration of 15% of the value and sales effected by the AE in India. This profile of the assessee is not in dispute for comparability or otherwise of the entities we have to compare their functional profile with that of the assessee. 25. It is seen from the record that the assessee has not produced the material to capture functional profile of these two companies with reference to the agreements for provision of services and the material produced before us in the shape of relevant extracts of annual report is insufficient to reach a definite conclusion on this aspect. When we have to compare the function....
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....ought to our notice that they Apitco Ltd., was rejected by a catena of decisions rendered by different Benches of this Tribunal including a coordinate Bench of this Tribunal in Ciena India (P) Ltd. vs. DCIT in ITA No. 2948 and 3224/Del/2013 following which in Avaya India private limited versus DCIT in ITA No. 146/Del/2013. He also placed reliance on the nation reported in Kobelco Cranes India Private Limited vs. ITO in ITA No. 802/Del/2016. In International SOS services India private limited versus DCIT ITA No. 1631/Del/2014 this company was excluded on account of being hundred percent government organisation and the appeal against this decision of the tribunal was dismissed by the Hon'ble jurisdictional High Court.. Further it could be seen in Vestegaard Asia private limited verses DCIT in ITA No. 6670/Del/2015 and H & M Mouritz India private limited verses DCIT in ITA 282/bang/2015 it is held that the Aptico Pvt. Ltd., is not a good comparable with any company rendering business support services on the ground that this company is a public sector undertaking and its operations are mainly based the on the policy requirements of the government. 15. Further reliance is placed b....
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.... list of comparables. It is pertinent to note that in Adidas technical services private limited (supra) TSR Darashaw Ltd. was considered and rejected. The Tribunal in Vestergaard Asia private limited (supra) found that Cameo corporate services and TSR Darashaw Ltd. stand on the same footing and are not good comparables to the market support service providers. 22. Going by the profile of Cameo corporate services extracted by the Ld. TPO in his order and also in view of the non-availability of segmental information in the financials of this company coupled with the findings of a coordinate Bench of this Tribunal Vestergaard (supra), we are of the considered opinion that Cameo Corporate Services is not a good comparable to the assessee in view of the functionality similarity. We, accordingly, direct the Ld. TPO to delete this company from the final set of comparables. Killik Agencies and Marketing Ltd. XXXXX 32. From the Annual Report of this company we find that Killik Agencies and Marketing Ltd. is a public Ltd. unlisted company acting as agent for various foreign prince falls for sale of dredgers, Dredging Equipments, steerable Rudder propulsion, maritime and aviation light....
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....d. is not a good comparable to the entity providing marketing support services. 29. In Adidas Technical Services P. Ltd. (ITA No. 1233/Del/2015), the company is engaged in rendering support services to AE which in turn renders sourcing services to Adidas group companies for international premium range of footwear and apparels and accordingly their role is limited to supporting its AE. In that case, a coordinate Bench held that for a company rendering marketing support services, Apitco Ltd. is not at all a good comparable. Hence, we find that because of the peculiarity of Apitco being a Government Company and engaged in providing technical consultancy relating to asset reconstruction companies, management services, micro enterprise development, skill development etc. on the Government initiatives, which do not fall in comparison to the services provided by the assessee, we are of the considered opinion that Apitco Ltd. is not at all a good comparable and has to be deleted. Coming to Cameo Corporate Services Ltd. and Killick Agencies, these entities have already been held to be non-comparable with the assessee like companies in the case of Philip Morris Services (supra) and the same....