TaxTMI 
TaxTMI 
2019 (10) TMI 1580
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....as primarily engaged in the provision of market support and manpower & design services to AEs and rendering engineering services to third parties. It filed its return of income on 28.11.2011 declaring total loss of Rs. 3,67,18,795/-. Since the assessee had entered into international transactions with various associated enterprises as per Form No. 3CEB filed along with the return of income, the Assessing Officer referred the matter to the TPO for determination of the arm's length price of the international transaction u/s. 92CA(3) of the IT Act. The TPO analysed the functions performed, assets employed and the risk assumed by the assessee and noted that the segment of market support services has been benchmarked by the assessee using TNMM as the most appropriate method and operating profit/total cost (OP/TC) as the PLI. He noted that the assessee was showing OP/TC at 10.75%. Based on three years' data, the assessee had used four comparables weighted average margin of which comes to 7.33%. He noted that the assessee has selected the following comparables whose OP/TC using the current year data was 11.20%:- S.No. Company Name OP/TC (%) 1. Quadrant Communication ....
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....AA were also brought to the notice of the Assessing Officer. Relying on various decisions, it was submitted that the services rendered to the assessee do not qualify for TDS under the India-Finland DTAA but the services availed outside the purview of technical services either on the ground that they are managerial in nature and, hence, outside the fees for technical services as defined in the India-Finland DTAA. So even if they are assumed to be technical in nature, they do not 'make available' any technology, know-how, skill, etc. to the recipient during the course of rendition of such services. It was accordingly submitted that the provision of services by the assessee would not fall under the definition of FTS provided under the India-Finland DTAA and hence not taxable as FTS. 7. However, the Assessing Officer was not satisfied with the explanation advanced by the assessee. He noted that the services provided by Outotec Oyj is very well covered under the 'Fee for technical services' as defined in the Indo-Finland Treaty. Therefore, the contention of the assessee that as per the provisions of section 90(2) of the Act Outotec Oyj is allowed to take the benefit o....
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.... (MSS) to its Associated Enterprises (hereinafter referred to as 'AEs'). 2. That the Ld. panel has erred in rejecting the economic analysis and conducting a fresh search by application of certain arbitrary filters in determining the arm's length price with respect to international transaction pertaining to rendering of MSS, without providing any cogent reasons. 3. Without prejudice to Ground 2 and on the facts and circumstances of the case the Ld. Panel had erred in confirming the adjustment made by the Ld. AO and selecting comparable companies which are engaged in rendering services other than MSS and are therefore functionally not comparable with the assessee. 4. That the appellant craves leave to add to and to alter, amend, rescind or modify the grounds raised hereinabove before or at the time of hearing of the appeal." 9. Aggrieved with the order of the DRP, the Revenue is in appeal before the Tribunal by raising the following grounds:- 1. On the facts and in the circumstances of the case, the Hon'ble DRP-II has erred in excluding M/s. Global Procurement Consultants Ltd. from the list of comparables. 2. On the fact....
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....er dated 25th January, 2019, he submitted that following the above decision, the Tribunal had directed the TPO to exclude MMTV Ltd., TSR Darashaw Ltd. and Info Edge (India) Ltd., from the list of comparables. Referring to the decision of the Bangalore Bench of the Tribunal in the case of H&M Mauritz India Pvt. Ltd. vs. DCIT, vide IT(TP)A No. 282/Bang/2015, order dated 19th August, 2016, he submitted that the Tribunal in the said decision has directed the TPO to exclude Aptico Ltd. and TSR Darashaw Ltd., from the list of comparables. He accordingly submitted that the four companies included by the TPO and upheld by the DRP should be excluded from the list of comparables. 11.1. So far as the comparable, namely, M/s. Global Procurement Consultants Ltd., is concerned, he submitted that the DRP has rightly excluded the said company from the list of comparables. Referring to the decisions cited earlier, he submitted that M/s. Global Procurement Consultants Ltd., has been held to be not a good comparable by the coordinate Benches of the Tribunal. So far as the deletion of Rs. 1,62,88,677/- by the DRP is concerned, the Ld. counsel for the assessee drew the attention of the Bench to the ....
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....ly, proposed addition of Rs. 56,78,697/-. We find the DRP directed to exclude M/s. Global Procurement Consultants Ltd., from the list of comparables. While the Revenue is challenging the exclusion of this company from the list of comparables, the assessee is basically challenging the inclusion of four comparables, namely, (i) Aptico Ltd.; (ii) Info Edge (India) Ltd.; (iii) MMTV Ltd.; and (iv) TSR Darashaw Ltd. 15. We find the coordinate Bench of the Tribunal in the case of Adobe Systems India Pvt. Ltd. vs. ACIT (supra), while discussing the inclusion/exclusion of certain comparables in the provision of market support services segment, has directed the A.O./TPO to exclude MMTV Ltd., Aptico Ltd., Global Procurement Consultants Ltd., TSR Darashaw Ltd. and Info Edge (India) Ltd. The relevant observations of the Tribunal while excluding each comparable are as under:- "25. We have considered the rival arguments made by both the sides and perused the material available on record. So far as MMTV Limited is concerned, the DRP excluded this company from the list of comparables on the ground that this is functionally different entity and does no....
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....enue before the Tribunal. We, therefore, uphold the order of the DRP in excluding the company from list of comparables. The ground No. 2 by the Revenue is accordingly dismissed. ............................................................................................... 40. After hearing both the sides, we find the Info Edge (India) Limited was included by the TPO holding that it is functionally comparable which has been upheld by the DRP. We find the Tribunal in the case of Rolls-Royce India Pvt. Ltd. (supra) while directing the TPO to exclude this company as comparable from the market support services segment has observed as under:- 21. Regarding Infoedge India Pvt. Ltd. we are of the view that this company has been included by the TPO holding that it is functionally comparable. Assessee contended before the Ld. TPO as well as DRP that this company is functionally not comparable in view of it engaged in management of online portals and also has major sources of revenue as advertisement income. Both the lower authorities rejected the contention of the assessee. We have carefully considered the rival contentions. It is apparent that the comparable sele....
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....ground that this is functionally different entity and does not make a good comparable to the assessee in MSS function. Further, the submission of the assessee that it has significant intangibles could not be converted by the Ld. DR. Since the above company is engaged in the business of televisions broadcasting and related operations and it has got significant intangibles, therefore, we hold that this company cannot be compared with that of the assessee company. The order of the DRP is accordingly upheld. ..................................................... 31. So far as TSR Darashaw Ltd. is concerned, we find this company is engaged in share registry and transfer services, depository services, record management, payroll and provident fund management and corporate fixed deposit management which are in the nature of IT enabled services as evident from page 21 of the annual report. WE, therefore, uphold the order of the DRP in holding that this is functionally different entity. Further, this company was rejected by the Tribunal in assessee's own case for Assessment Year 2009-10 and the DRP in assessee's own case for Assessment Year 2010-11 and no appeal was ....
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....xclude this company from the list of comparables." The assessee company is engaged in provisions of marketing support services to Teijin-Japan and other group companies, while the comparables are functionally different from the assessee companies which can be seen from the Annual reports of each of the comparables. The DRP has given proper direction for excluding these comparables contested by the Revenue. The Ld. DR also was not able to demonstrate that the functional profile of these comparables is similar to that of assessee company. Therefore, the appeal filed by the Revenue is dismissed." 17. Similarly, the Bangalore Bench of the Tribunal in the case of H & M Mauritz India Pvt. Ltd. (supra), while directing to exclude Aptico Ltd., Global Procurement Consultants Ltd., and TSR Darashaw Ltd., from the list of comparables, has observed as under:- "10. We have considered the rival submissions. We find that as per para-13 of the TPO's order, he has considered six companies as good comparables having average profit of 27.74%. On page-3 of the TPO's order, the assessee's profit margin has been noted as 12.06%. Now as per arguments of the Ld. AR of the ....
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....ty of procurement by providing the comprehensive range of procurement related advisory services at inter-allied activities for projects in India and abroad and hence is functional comparable. The ITAT Delhi I-2 Bench in the case of International SOS Services Ltd. vs. DCIT in ITA 1631/Del/2014 order dt. 8.12.2015, at para 4 has held as follows. "4. Global Procurement Consultant Limited: 12.6 The Ld. Counsel for the assessee submitted that this is an 100% Government owned company as it is promoted by Exim Bank. He vehemently contended that functionally, this company is not a comparable, as it works with in the field of power, water resources, transportation industry such as economic, textile, mining, cement, leather, health education, environment, InfoTech etc. The pith and substance of the submission are that the areas in which this company provides support services is totally different from the type of support services provided by the assessee. He placed reliance on the decision of the Hon'ble Delhi High Court in the case of Rampgreen Solutions Pvt. Limited vs. CIT, ITA No. 102/2015 judgment dated 10/08/2015 for the proposition that functionally dissimilar com....
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....ore us that, companies having a broad functional profile of rendering skilled professional support services, should be taken as comparable companies, the proposition laid down in Rampgreen Solutions Pvt. Ltd. (supra), cannot be applied to the facts of the case on hand. In view of the above discussion. we are of the considered opinion that Global Procurement Consulting Limited has rightly be taken as the comparable by the TPO. Hence we dismiss this argument of the assessee. Consistent with the view taken therein, we agree with the Ld. TPO that this company has to be taken as functionally comparable. But this company is also undertaking many other activities such as valuation etc. The issue for consideration would be as to whether segmental data is available. If such data is available then the company has to be taken as a comparable. As the argument of the Ld. Counsel for the assessee is that there are no segmental results available, this company is directed to be excluded as a comparable. ............................................................................................... (d) TSR Darashaw Ltd.:- The TPO included this company on the ground that the compan....
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....roll and employee trust fund administration and management. When we compare the nature of pay roll activity undertaken by this company with the marketing support services rendered by the assessee to its AEs, we find that both are way apart from each other. There can be no logical comparison between a specific pay roll services rendered by a company to its clients with the marketing support services rendered by the assessee to its AEs. This company is, therefore, directed to be excluded from the final set of comparables." Consistent with the view taken in the above case, we direct the AO/TPO to exclude this comparable. 12. Respectfully following this Tribunal order, and the absence of any difference in facts having been pointed out by the Ld. DR of the revenue, we direct the AO/TPO to exclude these three companies i.e. M/s. Aptico Ltd., M/s. Global Procurement Consultants Ltd., and M/s. TSR Darashaw Ltd. from the list of final comparables and since, the average profit of the remaining three comparable i.e. M/s. Cyber Media Research Ltd.,14.85%, M/s. HCCA Business Services Pvt. Ltd., 20.05% and M/s. Quadrant Communications Ltd., 1.11% is around 16% which is within +....
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....l design. However. Indo-Finland DTAA (2010) defines FTS in Article 12(3)(b) as under: b) The term 'fees for technical services' as used in this Article means payments of any kind, other than those mentioned in Articles 14 and 15 of this Agreement as consideration for managerial or technical or consultancy services, including the provision of services of technical or other personnel. Notification No. 36/2010 Dated: May 20, 2010 of Indo-Finland DTAA (2010) provides as under: And, whereas, the date of entry into force of the said Agreement is the 19th day of April, 2010, being thirty days after the date of later of the notifications of completion of the procedures as required by the respective laws for entry into force, of the said Agreement, in accordance with paragraph 2 of Article 29 of the said Agreement; And, whereas, sub-paragraph (b) of paragraph 2 of Article 29 of the said Agreement provides that the provisions of the said Agreement shall have effect in India in respect of the taxes withheld at source, for amounts paid or credited on or after 1st April of the calendar year next following the year in which the Agreement enter....