TaxTMI 
TaxTMI 
2020 (1) TMI 1620
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....TTK Healthcare as a comparable company without appreciating the following; a TTK Healthcare is engaged in manufacturing activity as opposed to the appellant, which is engaged in trading activity. b TTK Healthcare has earned abnormally high margin beyond industry standards for trading activity. c Related party transactions of TTK Healthcare account for 21% of its revenue, which is exceeding 15% and hence, it should not be considered as a comparable to ensure reliable comparability analysis. 3. The above grounds of appeal are discussed together as they address a common issue. Roche Diagnostics India Pvt. Ltd. ('Roche India' or 'the Appellant'), is engaged in distribution of biomedical equipment, reagents and spares for such equipment in India. The main products for the critical care segment are Blood Gas and Electrolyte Analyzers. It also provides marketing support services for diagnostic equipments distributed by Roche Diagnostics Asia Pacific Pte. Limited ('RDAP'). As per the transfer pricing (TP) study prepared by the appellant, its operating profit margin was worked out at 4.39% as against the average industry margin of comparables at 3.77% und....
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..... Further the Ld. counsel submits that in the preceding year viz. AY 2010- 11 and all subsequent years (viz. AYs 2012-13, 2013-14 and 2014-15) the TPO has not selected TTK Healthcare as comparable. In this regard, he makes reference to the relevant pages of the Paper Book which contains the concerned TP orders. Also it is stated by him that in subsequent year viz. AY 2012-13, the appellant had submitted a presentation on TTK Healthcare downloaded from the Bombay Stock Exchange Website which makes it clear that TTK Healthcare is engaged in manufacturing of medical devices. Thus it is submitted by him that after considering the submissions, the TPO in AY 2012- 13 excluded TTK Healthcare and passed favourable order without any adjustment. Reliance is placed on the decision of the Hon'ble Bombay High Court in the case of Pr. CIT v. Aptara Technology Pvt. Ltd. (ITA No. 1209 of 2015), wherein it is held that a company which was included by the TPO as comparable in preceding year cannot be rejected, if revenue is not able to establish any difference in the facts from that existing in earlier year. Further reliance is placed by him on the order of the ITAT, Mumbai in the case of M/s ....
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....t assessment years viz. AYs 2012-13, 2013-14 and 2014-15. However, it is found that the above submission made before us, was not filed before the AO/TPO or DRP. However, it may be mentioned here that two companies can be treated as comparable when both are discharging the overall similar functions, though there may be some minor differences in such functions, not impacting the otherwise comparability. Notwithstanding the functional similarity, many a times a company ceases to be comparable because of other reasons as well. To cite an example, if company 'X', though functionally similar to company 'Y', but has related party transactions breaching a particular level, then, such company cannot be considered as comparable to company 'X' in the year in which related party transactions breach such a level. If, however, in subsequent year, the related party transactions fall below that barrier, then such company would again become comparable. In the same manner, a company might have been treated as non-comparable due to the TPO adopting its entity level results for comparison with the segmental results of the case before him, but in a later case, the TPO may take only the related segme....
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....e tax disallowance u/s 40(a)(i) of the Act. Consequently, the AO passed final assessment order dated 29.01.2016 u/s 143(3) r.w.s. 144C(5) of the Act, disallowing expenses of Rs.2,64,09,027/- u/s 40(a)(i) on the ground of non-deduction of tax at source u/s 195 of the Act. 8. Before us, the Ld. counsel for the assessee reiterates his submission before the DRP. On the other hand, the Ld. Departmental Representative (DR) supports the order passed by the AO. 9. We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below. 9.1 The appellant has made remittance of Rs. 1,48,016/-to Duo Contrusting (Tax resident of Germany) and Rs.1,97,529/- to Right Management (Tax Resident of Singapore) towards participation of its employees in conference/seminar held in Hong Kong and Singapore respectively. It has made payment to Duo Contrusting towards fees for its employees viz. Mr. Arora Bobby, Mr. Sanjay Singh and Mrs. Pranjal Sharma for participation in conference held on 14 and 15 December 2010 in Hong Kong. Further, the appellant has paid participation fees to Rights Management towards participation of its employee viz. Dr....
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....rms of Article 5 of the said DTAA and therefore, the business income of Right Management should not be subject to tax in India as per Article 7 r.w. Article 5 of the said DTAA. Further, as per Article 12(4)(b) of the said DTAA, consideration towards technical knowledge, skill etc. would be considered as FTS only if the technical knowhow, skill etc. is made available to the recipient of the services. Further, Right Management has not transferred or made available any technical knowledge or skills to the appellant and therefore, payments made to Right Management are not in the nature of FTS and not liable to tax in India having regard to the provisions of the said DTAA. Since participation fees for attending seminar is not taxable in India, the question of TDS on aforesaid payment does not arise. 9.3 In respect of payments to Global Data Ltd. for obtaining market analysis and forecast report of Rs.1,36,032/- we find that the said expenses were booked in the FY 2009-10 and only remittance was made during the FY under consideration i.e. FY 2010-11 and as such the question of disallowance of expenses which has not been claimed for the FY under consideration i.e. FY 2010-11 shall not ....
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....nnot be construed as a "fee" for services rendered since what is achieved by a reimbursement is mere repayment of what has been already spent and is not a reward or compensation for services rendered. Further, the transactions relating to reimbursement of expenses to AE have been subject matter of TP assessment and the fact that the reimbursement of various expenses are at actual cost, with no profit element has been accepted by the TPO. Further, the DRP has granted relief in case of reimbursement of expenses of similar nature paid to other Roche group companies against which the Department has not filed appeal before the Tribunal. In this context we rely on the decision by the Hon'ble Supreme Court in the case of DIT v. A.P. Moller Maersk A S (2017) 78 taxmann.com 287 (SC), the decision by the Hon'ble Bombay High Court in the case of DIT (IT) v. Krupp UDHE GmbH [2010] 38 DTR (Bom)251. 9.7 Regarding payments to Genentech Inc towards reimbursement of relocation expenses of Rs.7,51,149/- to Mrs. Rita Kale, we observe that reimbursement of expenses does not constitute income and accordingly should not be subject to TDS. 9.8 In respect of reimbursement of expenses of Rs.57,58,247....
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....d promotion of the appellant's products and for providing various services to the new customers (end user) like providing guidance on usage of the products, its benefits etc. and Sanofi has recovered the actual salary cost of Mr. Mostafa and other related costs incurred by Sanofi from the appellant. Further, even if the aforesaid payments are considered as FTS, the same should not be subject to tax in India in the absence of specific Article of FTS in India-Bangladesh DTAA. 9.12 Regarding the reimbursement of expenses to JL Morison Sons & Jones (Ceylon) Ltd. ('JL Morison') of Rs.11,87,799/-, it is observed that as per the arrangement between JL Morison and the appellant, the former buys products and re-sells them on its own account and the business between the them is on a principal-to-principal basis and the role of JL Morison is to promote sales of products of the appellant and not to manage the appellant's business. Also out of the above expenses, a sum of Rs.3,79,805/- has been booked in FY 2009-10 and therefore, the disallowance in the impugned assessment year does not arise. In respect of the disallowance of the balance amount of Rs.8,07,994/- we find that the appellant ha....