TaxTMI 
TaxTMI 
2021 (9) TMI 1322
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....e order passed under section 92CA(3) of the Act by the Transfer Pricing Officer ('TPO'). 3. That the AO/TPO erred on facts and in law in making adjustment of Rs. 34,67,344 to the income of the appellant on account of difference in the arm's length price of the international transaction of provision of market support services to the associated enterprise. 3.1 That the AO/TPO erred on facts and in law in considering Just Dial Ltd. as comparable not appreciating that the audited financial statement of the company for the financial year 2011-12 is not available in public domain and also do not satisfy the comparability criteria laid down in rule 10B(2) of the Income Tax Rules, 1962 ('the Rules'). 3.2 That the AO/TPO erred on facts and in law in rejecting the following comparable companies considered by the appellant in the Transfer Pricing Documentation not appreciating that these companies are functionally comparable to the appellant: S. No. Name of the company 1. I Indian Tourism Development Corporation Ltd. 2. Cyber Media Research Ltd. (Formerly IDC (India) Ltd.) 3. EDCIL (India) Ltd. (Segmental) 4. In house productions Ltd ....
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.... approval of the Reserve Bank of India for a purchase consideration of Rs. 19,44,70,482/-. 4. In accordance with the provisions of Section 92C r.w. Rule 10B & 10C, the assessee has choosen TNMM as the most appropriate method vide order u/s 92CA(3) dated 29.01.2016. The TPO determined ALP of the transactions and proposed an adjustment of Rs. 3,49,96,839/- vide order dated 11.03.2016. The AO pursuant to the directions of the ld. DRP made adjustments of Rs. 3,15,29,495/- on account of Intra Group Services and Rs. 34,67,344/- on account of market support services. 5. The assessee mainly involved in three different activities namely ophthalmic support, marketing support and provision of Intra Group services. 6. With reference to the marketing research, the assessee appraises the AE of current market trends and developments in India by monitoring the industry, capital prices, political factors, supply and demand of the relevant Indian market in addition to identifying the potential customers in India. It is also involved in providing support and liason between the customers and Corning France (AE). Comparables: 7. With regard to the comparables selected by the AO in his TP st....
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....ble otherwise the entire exercise will be tainted by the inaccuracies. 14. Hence, the question before us would be whether the risk of having a single customer is equivalent to the marketing and technical risks attached to the comparable. A single customer risk is an anticipated risk ab initio. The anticipated risk may happen or it may not happen. Whereas the risk attributed to the comparables is an existing risk. At the same time, we find that the assessee is not exposed to any of the risks such as market risk or service liability risk, collection risk, capacity utilization risk for the AE being the sole customer. The question before us is as to whether the risk of having a single customer is equivalent to the marketing and technical risk attached to the comparables. According to the TPO, the assessee has the 'single customer risk' meaning, if the single customer refuses to have any dealings with the assessee, the assessee would lose all of its business and there would be no profit at all. But, as we see it, the risk of having a single customer is anticipated risk which may or may not happen. What we have to see is the position in the relevant period whether the appellant ha....
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....sessee is lower than the average operating profit margin of the comparable companies, therefore, the international transaction of receipt of administrative support services can be considered to be at arm's length. 19. The TPO determined the value of such "expenditure" at 'NIL' holding that: a. No services were actually received by the assessee b. No benefit was derived by the assessee by making payment for Administrative Support Services c. No evidence was furnished substantiating the receipt of administrative services d. The services were not actually needed by the assessee 20. The ld. AR argued that during the relevant financial year, the assessee paid administrative and support fees of Rs. 3,15,29,495/- to the associated enterprises which are remunerated at a cost plus 5 percent markup, wherein, cost includes all direct and indirect cost incurred in the provision of aforesaid services. This entails payment of all fixed costs, recognized on the basis of time spent by the service provider, and the same is allocated to the service recipient on the basis of the volume of usage, plus a mark-up of 5 percent. 21. For provision of administrat....