TaxTMI 
TaxTMI 
TaxTMI 
2022 (12) TMI 330
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....stment to total income of Rs.8,37,93,883/- under Chapter- X of the Income Tax Act, 1961. 2.1 That on facts and in law the DRP erred in issuing directions to AO/TPO resulting in enhancement of TP adjustment by Rs 52,66,229/- (i.e from Rs.8,37,93,883/- to Rs.8,90,60,1121- ). 3. That on facts and in law the TPO erred in observing that the appellant is providing following services: (a) Fuel Management (b) Escort Services 4. That on facts and in law the TPO erred in rejecting and the DRP inter alia erred in upholding the rejection of economic and benchmarking analysis conducted by the appellant. 4.1 That without prejudice on facts and in law the TPO/DRP erred in: (a) Rejecting the use of internal TNMM benchmarking analysis conducted by the appellant. (b) Rejecting the use of multiple year data. (c) Holding that the segmental accounts submitted by the appellant are not reliable. (d) Computing PLI of the tested party at 3.91 %. (e) Computing PLI of comparable companies at 24.84%. (e) Rejecting applicability of an upper turnover filter of Rs.1,000cr. (f) Not conducting a fresh search for comparable companies after rejecting the benchmarking process ap....
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....30 Iv Payment for chip cards 751,347 v Reimbursement of expenses 7,040,259 6. The taxpayer furnished its TP study and selected TNMM as the most appropriate method to benchmark its international transactions at S.No. (i) to (iv). Since the taxpayer was providing ground handling services both to its AE and non AE, the taxpayer computed the operating profit (OP/TC) for each of this segments. The OP/TC of AE segment was 61.22% and that of non AE segment was (-)34.42%, therefore the taxpayer held that since the profit of AE segment was more than the non AE segment therefore, the payments charged for providing ground handling services to its AE was at arm's length. 7. However, in TPO's view the method of using internal TNMM was not correct because there was no reliability about the segmental accounts drawn up because the same were not part of the audited financials and further reasonable allocation keys were not present while allocating expenses between AE and non AE transactions and further certain costs were also not allotted to the segment C (others). Accordingly, TPO applied the external TNMM by taking comparables which were selected in the last year's TP ....
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....d it is submitted that the TPO has not properly appreciated the functional profile of the 'A'. Similar allegations were levied by the TPO in case of 'A' for AY 2007-08. Issue was adjudicated upon by Hon'ble ITAT vide order dated 18th ITA No.1479/Del./2014 7 February 2019 reported in (2019) 103 taxmann.com 268( Del) and at para 7 it was held as under: "7. We have carefully considered the rival contentions and also perused the orders of the lower authorities. Firstly it is important to identify the exact nature of the services rendered by the assessee to understand the functional profile of the assessee. Such profile has been disputed by the assessee wide ground number 2.2 of the grounds of appeal. The functional profile stated in the transfer pricing study report prepared by the assessee is sketchy and does not deserve any mention. The learned transfer pricing officer in para number 2 is extracted the activities carried out by the assessee from the website of the assessee. On that basis the learned transfer pricing officer and stated that the assessee is providing a very specific mission services and having a specialized functions which require critical knowle....
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....nd passenger handling services to the airlines at Indian airports. In its asset base it does not have any immovable property but the total asset base is INR 25,76,70,389/-." The above conclusions of Hon'ble IT AT has thereafter also been followed in case of 'A' for AY 2008-09 {refer ITAT order dated 30th June 2021 in ITA No. 5711/Dell2012 copy enclosed at pages 106-131, relevant at pages 117 to 123, para 5 and 5.1.} It is therefore submitted that the TPO has not properly appreciated the functional profile of the 'A'. Once the understanding of functional profile by the TPO was wrong there was bound to be errors in search and selection of comparable companies. B. Once the functional profile as accepted by Hon'ble ITAT in immediately preceding year is considered then the following comparable companies selected by the TPO and upheld by the DRP merit exclusion. (i) Container Corporation of India - TPO has upheld selection of this comparable at page 134, para (i). DRP has further upheld selection of this comparable in a summary manner without at page 38, last para without any objective analysis. Following facts pertaining to this comparable are highlighte....
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....or capital expenditure to an extent of Rs.790.222 lakhs. Apart from this, your company incurred major expenditure on an ongoing basis to maintain its container yard and warehouses and its operating fleet and equipments of Rs 231.81 lakhs. The above stated major initiative on facilities and its upgradation will have a positive factor on improving the customer satisfaction in the long run" This highlights the nature of business primarily carried on by the M/s Sanco Trans wherein it is into a business of earning passive income. Revenue shown in P&L Account is as under (refer Pg. 216 and 223 of PB) : "Operating earnings (Rs Lakhs) 2009 2008 Handling Charges earned 2307.15 1760.18 Equipment and fleet hire charges earned 1092.30 822.90 Agency and other charges earned 176.26 136.23 Warehousing charges earned 2590.81 1577.05 6166.52 4296.36" Handling charges earned is 37.41 % of total revenue and balance passive income i.e., hire charges earned and warehouse charged earned is 62.59%. There is no segmental accounts prepared (refer page 226, para 19 of PB). MIs Sanco Trans has earned total operating revenue of Rs. 6166.52 lakh and total employee cost income is ....
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....nce there is only one comparable remaining and hence only one price the tolerance range of +/- 5% is not applicable as it is applicable only when there are more than one price and an arithmetic mean has been arrived at. Ld. DR submitted that he shall be submitting case law in this regard. However, till date, no such case law has been submitted. 13. In this regard, we may gainfully refer to the concerned provisions of the Act :- "92C. (1) The arm's length price in relation to an international transaction or specified domestic transaction shall be determined by any of the following methods, being the most appropriate method, having regard to the nature of transaction or class of transaction or class of associated persons or functions performed by such persons or such other relevant factors as the Board may prescribe, namely :- (a) comparable uncontrolled price method; (b) resale price method; (c) cost plus method; (d) profit split method; (e) transactional net margin method; (f) such other method as may be prescribed by the Board. (2) The most appropriate method referred to in sub-section (1) shall be applied, for determination of arm's length price, i....