TaxTMI 
TaxTMI 
2024 (1) TMI 841
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....at on the facts and circumstances of the case and in law, the Ld. AO/DRP erred in law and on facts in disregarding the economic analysis undertaken by the Appellant to determine the arm's length price ('ALP') in accordance with provisions of the Act. 1.3. That on the facts and circumstances of the case and in law, the Ld. AO/DRP erred in including certain companies in the final set of comparable companies which are not comparable with the Appellant like • L&T Infotech Ltd • Persistent Systems Ltd • Tata Elxsi Ltd (Segmental) • Thirdware Solutions Ltd Specific Grounds - Information Technology enabled Services: 1.4. That on the facts and circumstances of the case and in law, the Ld. AO/DRP erred in law and on facts in disregarding the economic analysis undertaken by the Appellant to determine the ALP in accordance with provisions of the Act. 1.5. That on the facts and circumstances of the case and in law, the Ld. AO/DRP erred in including MPS Ltd in the final set of comparable companies. Specific Grounds - Marketing Support Services: 1.6 That on the facts and circumst....
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....e enterprise. The TPO recommended adjustment in the following manner: Sr. No. Nature of Service Total Adjustment (Amount in Rs. ) 1. Receipts from Software Development Services 79,33,23,295/- 2. Receipts from IT enabled services 19,63,94,681/- 3. Rendering of Marketing and Sales support services 3,30,74,885/- 4. Mark-up on costs of shares under ESPP 55,70,586/- Total adjustment 102,83,63,447/- Therefore, the assessing officer proposed addition of Rs. 102,83,63,447/- to the total income of the assessee as per draft order u/s 144C r.w.s 143(3) passed on 11.12.2016. The assessee filed objections before the DRP. The DRP has issued direction vide order dated 25.03.2021. The assessing officer has revised the assessment as per the direction of the DRP as under: Sr. No. Nature of services Total adjustment (Amount in Rs. ) 1. Receipts from software Development Services 58,88,39,009/- 2. Receipts from IT enabled services 19,63,94,681/- 3. Rendering of Marketing and Sales Support Services 3,30,74,885/- 4. Mark-up on costs of shares under ESPP 55,70,586/- Total adjustmen....
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....n companies in the final set of comparable companies which are not functionally comparable with assessee like Axis Integrated System Ltd. which was primarily engaged in the business of distributing digital signatures. The ld. DRP after following the decision of the DRP for the assessment year 2015-16 has rejected the objections filed by the assessee. 6. During the course of appellate proceeding before us the ld. Counsel referred the copy of marketing support services agreement entered between the assessee and its associate enterprise namely Juniper Network International B.V. The ld. Counsel also submitted that identical issue on similar fact in the case of the assessee itself has been adjudicated by the ITAT vide ITA No. 7412/Mum/2017 dated 30.08.2022 wherein it is held that Axis Integrated System Ltd. was functionally not comparable for the marketing support services rendered by the assessee, therefore, the assessing officer was directed to exclude Axis Integrated System Limited from the list of comparable. On the other side the ld. D.R supported the order of lower authorities. 7. Heard both the sides and perused the material on record. As per the marketing support services ....
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.... result, the appeal is partly allowed. Similarly, in the case of the assessee itself for A.Y. 2014-15 the ITAT Mumbai vide ITA No. 721/Mum/2022 after following the above referred decision directed the AO/TPO to exclude the Axis Integrated System Ltd. as comparable. Following the decision of the ITAT as referred supra the AO is directed to exclude the AISL from the list of the comparable, therefore, ground of appeal no. 1.6 to 1.8 are allowed. Ground No. 1.9 to 1.12: 8. These grounds of appeal are not pressed therefore the same stand dismissed. Additional Ground: 9. The assessee has filed additional ground of appeal during the course of appellate proceedings before us filed letter dated 12.04.2023 as under: "The Appellant had inadvertently considered following companies in its transfer pricing study report for comparability analysis for marketing support service segment which are as under:- a. Killick Agencies and marketing limited, and b. Majestic Research Services and Solutions Limited The Appellant would like to exclude the above companies based on the functional dissimilarity And would like to rely on various judicial precedents....
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....l submitted, the company is functionally different from the assessee as it is engaged in totally different set of activities. He submitted, unlike the assessee, this company is not a service provider and acts as agent for various foreign principals for sale of dredgers, dredging equipment, steerable rudder propellers etc. 14. Drawing our attention to the P & L account, he submitted more than 94% of its operational income was in form of commission income from its agency function. He submitted, the annual report does not provide segmental details of products, commission services and after sales support services. Thus, he submitted, the company cannot be treated as comparable. In support of such contention, he relied upon the following decisions: i) Bergen Engines India Pvt. Ltd. Vs. ACIT - ITA No.7802/Del/2017 dated 27.4.2020; ii) Hyundai Rotem Co. Vs. ACIT - ITA No.7569/Del/2019 dated 02.03.2020; & iii) Veolia India Pvt. Ltd. Vs. DCIT - ITA No,6770/Del/2015 dated 11.10.2019. 15. Strongly relying upon the observations of TPO and learned DRP, learned Departmental Representative submitted, TNMM requires broad comparability. He submitted, min....
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....hich is almost 30% of the income earned by them. We observe that Coordinate Bench in the case of Sabre Travel Technologies private limited v. DCIT (supra) in ITA. No. 7306/Mum/2017 dated 14.07.2021 has excluded this comparable with the following observations: - "5.10.2. The Id. AR also submitted that these facts were duly brought on record before the Id. TPO and the Id. DRP. The Id. AR also drew our attention to the financial statements of the said comparable for the year ended 31/03/2013, wherein it was pointed out that the said company is having inventory and stock in trade in its balance sheet and hence, it could be safely concluded that it is not merely the service rendering company. We also find from the Annual report of the said comparable companies that the company is acting as agent for various foreign principals for sale of dredges, dredging equipment, steerable rudder, propellers, maritime and aviation lighting, acoustic communication equipment etc., The company also offers after sale services. Apart from this, the company is involved in exports of micro switches, engineering items, acoustic items and head sets. 5.10.3. The Id. DR vehemently argued that ....