TaxTMI 
TaxTMI 
2023 (5) TMI 268
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....es, thereby resorting to double taxation in respect of below mentioned expenses. The expenses which have been subject to double disallowance include: * Expenses towards 'provision for gratuity' (INR 90,31,226); and * Expenses towards 'Middle management incentive' (INR 16,08,656) 3. That the Ld. AO erred in not taking cognizance of the submissions made by the Appellant that the expenses towards 'provision for gratuity' , disallowed in the intimation u/s 143(1) have already been disallowed by the Appellant in its computation of income. 4. That on the facts and circumstances of the case and in law, the orders passed by the Ld. AO / TPO/ DRP in respect of transfer pricing adjustment are not in accordance with law and contrary to the facts and circumstances of the present case, are bad in law and liable to be annul led. 5. That on the facts and circumstances of the case and in law, the Learned AO/ TPO / DRP have erred by not satisfying any of the conditions prescribed under section 92C(3) of the Act and making an impugned transfer pricing adjustment without appreciating and understanding the intricacies and cr....
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.... the final set of comparable while determining the arm's length price: * S G Analytics Pvt. Ltd. * Axis My India Ltd. * Majestic Research Services & Solutions Ltd. * Bombay Publicity Service Private Limited * Concept Public Relations India Limited * Oremus Corporate Services Private Limited * Crystal Hues Limited 9. Without prejudice to above, and on the facts and circumstances of the case and in law, the Ld. AO has grossly erred by computing an incorrect tax demand in the final assessment order amounting to INR 1,04,28,560 by considering inaccurate particulars of assessed income (at INR 3,23,91,048) as compared to the assessed income computed by the Ld. AO himself in the final assessment order (at INR 2,96,87,700). The said erroneous computation is a mistake apparent from record. 10. That on the facts and circumstances of the case and in law, the Ld. AO has erred in not granting credit of tax deducted at source amounting to INR 91,874. 11. That on the facts and circumstances of the case and in law, the Ld. AO has erred in not granting available credit of excess minimum alternate tax amoun....
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....account of functional dissimilarity. Further, introduced 7 additional comparables to arrive at a final set of 8 comparable companies and determined the ALP of 12.66 percent and 19.78 percent with a median of 12.91 percent. 6. At the outset it was submitted before the bench the assessee would like to contest for execution of 3 comparables namely, * SG Analytics Pvt, Ltd. * Axis My India Ltd. * Majestic Research Services and Solutions ltd. 1. SG Analytics Pvt, Ltd:- 7. The ld AR argued that SG Analytics is engaged in the provision of research and analytics services which includes Environmental, Social Governance ("ESG") consulting, investment research, market research, data management and analytics and Robotic Process Automation ("RPA"). It covers the following: a) Investment Research - The company claims to be one of the top investment research firms. It produces high-quality, in- depth, and tailored investment and financial research services to help clients successfully navigate financial markets, enhance their portfolios, and make strategic decisions. b) Data management & Analytics - It offers marketing analytics, custome....
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....rs (ii) communicating product information to customer (iii) customer relation (iv) market research (v) provision of liaison activities (vi) reporting 11. It was argued that from the perusal of the above broad categories, it is clear that the assessee company is providing all the services related to sales and marketing of the products. The assessee company is responsible for identification of customers, interaction with customers, maintaining long term relationship with customers, forwarding the feedback of the customers, ensuring supply of material to the customer, then col lection of payments from the customer etc., which in other words means that all the activities related to sale of products of AEs along with the entire customer interface/interaction is taken care of by the assessee company. It was argued that as mentioned in the TPSR, the assessee company is doing complete marketing which included entire market research for the AEs. The marketing and the market research functions as mentioned by the assessee in TPSR are detailed below:- (a) Assessee company provides market information to AE (b) The assessee compa....
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....fy that the first function for any financial/market research is data handling and its analysis only. So all the companies including the assesee company is involved in data analytics and the predominant function of both the assessee company and M/s SG Analytics is same i.e. market research. Thus it can be safely concluded that there is broad similarity of functions in assessee company and M/s SG Analytics which is market research and in TNMM only broad similarity of functions is required. Like assessee company, M/s SG Analytics also gets its revenue primarily from the services income, as mentioned in its financial and it passes all the filters applied by assessee/TPO. 15. With regard to the extraordinary events such as the comparable was involved in a finance fraud in F.Y 2015-16 which has been evidenced by the Company's investigating team and the statutory auditors, it was submitted that the so called fraud was committed in F.Y. 2015-16 and it is related to wrong cash withdrawal by employee. It is not known how this fraud is affecting the financials of F.Y. 2016-17. In fact if a fraud has taken place then it should reduce the profit margins and the assessee should not have a....
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....must be selected keeping in view the comparability factors as specified. Wide deviations in PLi must trigger further investigations/analysis. 44. Consideration for a transaction would reflect the functions performed, the significant activities undertaken, the assets or resources used/consumed, the risks assumed. Thus, comparison of activities undertaken/functions performed is important for determining the comparability between controlled and uncontrolled transactions/entity. It would not be apposite to ignore functional dissimilarity only the reason that its impact may be reduced on account of using arithmetical mean the PLI. The DRP had noted that eClerx was functionally dissimilar, but ignored same relying on an assumption that the functional dissimilarity would be subsumed in the profit margin. As noted, the content of services provided by the Assessee and the entities in question were not similar. In addition, there were also functional dissimilarities between the Assessee and the two entities in question. In our view, these comparability factors could not be ignored by the Tribunal. While using TNMM, the search for comparables may be broadened by including comparables....
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....sing research, brand research and consumer research, but also offers an array of other research services to assist companies in developing more successful products and stronger brands. It was argued that the comparable is also engaged in partnering with other companies for research work, due to which there are mergers, acquisitions and divestments reported in the annual report. Due to such merger and acquisition strategies, the company has shown an extraordinary and inorganic growth of 94.31% in FY 2016- 17. 21. Rebutting the arguments of the ld AR, the departmental representative Shri Rajesh Kumar vehemently argued that from the perusal of the documents it is seen that the comparable is mainly involved in market research, advertising research, brand research, consumer research and other research services to assist companies in developing successful products/brands. Thus predominantly it is doing the market research and the consumer research and both these functions are also done by the assessee company in relation to its parent company. As mentioned in the functional profile of the assessee company, it is absolutely clear that the assessee company does complete customer interfa....
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....e of completion method except when there is uncertainty as to measurement ultimate collectability then revenue recognition is postponed until such uncertainty is resolved. 25. The ld DR argued that from the perusal of the above, it is seen that revenue recognition policy of Majestic Research Service & Solutions Ltd. is similar to the assessee company and the assessee al legations are unfounded. On the issue of the said company has been rejected by the Ld. TPO herself in Assessee's own case for A.Y 2018-19, the ld DR argued that this concern of the assessee has been duly rejected by the DRP by speaking order however the following facts are mentioned for consideration of the bench. The ld AR Shri Vishal Kalra submitted his rebuttal in writing which has been duly examined. 26. Heard the arguments of both the parties and perused the material available on record. 27. On the issue of functions performed by both the entities, we find that the assessee does conduct market research and provide market support to the AE. This functions include identification of the customer, market research, liaison and reporting. The assessee provides market information to the AE, responsible fo....
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.... report at page no. 284 regarding mergers and acquisitions is mentioned below- 22. MERGERS, ACQUISITONS AND DIVESTMENT Your company had divest its shareholding in Scent analysis Majestic Pvt. Ltd. To its IV partner Analysis the Scent International GmbH. The decision to divest from this business was due strategic differences in the business model to be followed. MRSS believes that the services it offers its clients should not be restrictive and not from one single partner only. MRSS prefers to be an aggregator of 'Market Research Technologies' and so would be the case in the area of 'Sensory Research'. The Company has transferred 50% Stake and control in Scent Analysis Majestic Pvt. Ltd. To Analysis the Scent International GmbH and its nominee on 28th December, 2016. 30. From the above, it is seen that there was no mergers/acquisitions in the instant year as contended by the assessee. In fact there was only divestment of shareholdings which has no impact in the instant year's P&L account. And, the assessee company's contentions appear to be irrelevant and baseless as far as selection of the company as comparable is concerned. ....