TaxTMI 
TaxTMI 
TaxTMI 
2025 (3) TMI 944
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....rovisions of Chapter X of the Income-tax Act, 1961 ('the Act'). Legal Grounds: 2. On the facts and circumstances of the case and in law, the learned AO (Technical Unit) has erred making a reference u/s 92CA (1) of the Act without having any powers for making such a reference. Accordingly, the Transfer Pricing reference is bad in law, consequently the TP order dated July 24, 2023, is bad in law and ought to be quashed. 3. On the facts and circumstances of the case and in law, the learned TPO [Asst Commissioner/Deputy Commissioner TP 2 (2)(2)] has erred in passing the TP order dated July 24, 2023 without having any jurisdiction to pass such order. Accordingly, the said TP order is bad in law and ought to be quashed. 4. On the facts and circumstances of the case and in law, the learned DRP has erred in issuing directions violating the mandatory provisions of section 144C (8) of the Act, read with the explanation thereto. Accordingly, the directions of the learned DRP are bad in law and ought to be quashed. Consequently, the final assessment order dated June 26, 2024, is bad in law and ought to be quashed. 5. On the facts and circumstances of the case and in law, the ....
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....sociated enterprises (AEs), akin to Knowledge Process Outsourcing ('KPO') services and thereby, imputing the median margin of alleged KPO comparable companies, to the value of impugned transactions. 12. On facts and circumstances of the case and in law, the learned TPO and the learned AO under the directions of Hon'ble DRP, erred in arbitrarily cherry picking KPO comparables from public domain without following a methodical search process, thereby violating procedures laid down in section 92C(1) and 92C(2) of the Act read rule 10C(2) and 10B of the Income Tax Rules, 1962 ('the rules'). 13. On facts and circumstances of the case and in law, the learned TPO and the learned AO under the directions of Hon'ble DRP, erred in disregarding the rebuttals submitted for KPO comparables selected by the ld. TPO and selectively retaining these comparable companies inspite of having a completely different functional profile, thereby enhancing the adjustment value from INR 6, 81, 76, 073 to INR 8, 45, 84, 864/-. 14. On facts and circumstances of the case and in law, the learned TPO and the learned AO under the directions of Hon'ble DRP, erred in adopting comparabl....
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....Large Value Refund. (vii) Turnover shown in ITR is substantially lower in comparison to Turnover shown in GSTR 1 return. (viii) Taxable business receipts shown in Schedule TDS2 is higher than the receipts shown in P&L Account. 4. This case was selected for high-risk international transactions basis. Accordingly, the Assessing Officer observed that assessee has entered international transactions, hence, the case was referred to TPO. 5. Based on the notice, the documentations prescribed under Rule 10D of the Income-tax Rules, 1962 (for short 'the Rules') and other details were called and the same were furnished and kept on record. 6. Assessee is engaged in the business of providing advertising services. It plans, develops and helps clients to implement effective advertising strategies. It emphasis on creativity, performance and innovation for its solutions to the clients. As per Form No.3CEB, the assessee has declared the following international transactions: S. No. Nature of the Transaction Value of Transaction (In Rs. ) 1. Fees paid pursuant to global information services (GIS) agreement 3, 33, 21, 723 2. Fees paid pursuant to Microsoft License agreement 2, 45....
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....P can be determined for several transactions taken together. Accordingly, he proceeded to make the benchmarking of the international transactions by aggregating all the international transactions under TNMM as the Most Appropriate Method (MAM). Accordingly, he combined all the international transactions and applied various filters, such as, use of multiple year data, different financial year, rejected the companies where turnover is less than Rs. 1 crore, rejected companies having less than 50% of service income, rejected companies whose transaction with related party is more than 25% of its turnover and rejected the companies which are affected by some peculiar economic circumstances. Based on the above filters, the TPO selected 9 comparables by treating the assessee as KPO and arrived at the median of 22.27% OP/OC. Accordingly, he applied the mark up of 22.27% by adopting CUP method to benchmark the transaction to benchmark the intra-group services and determined the ALP adjustment of Rs. 6, 81, 76, 073/-. 8. Before the TPO, the assessee has raised objections with regard to selection of comparables on the basis of KPO to benchmark the transactions pertaining to advertising servi....
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....and proceeded to apply the ALP margin of 22.27% and proposed ALP adjustment of Rs. 6, 81, 76, 073/-. 10. Aggrieved with the above order, assessee filed objections before the ld. DRP on the IGS services. The assessee submitted detailed submissions before the ld. DRP. After considering the detailed submissions of the assessee, ld. DRP rejected the submissions on the issue of CUP as the most appropriate method and proceeded with combining that similar class of transactions as IGS. Further on the issue of selection of comparables, the TPO has selected 9 comparables out of which ld. DRP has excluded Liquidhub Analytics Pvt. Ltd. and Bureau Veritas (India) Pvt. Ltd. and retained 7 comparables. Accordingly, Assessing Officer/TPO was directed to recompute the ALP mark up. Accordingly, TPO in order giving effect order dated 24.06.2024 adopted 7 comparables and recomputed the median of mark up at 27.63% and determined the ALP of Rs. 8, 45, 84, 864/-, by adopting the same, final assessment order was passed. 11. Aggrieved with the final assessment order, assessee is in appeal before us. 12. At the time of hearing, ld. AR submitted that the assessee while rendering advertising services (eith....
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.... submits basis the said internal TNMM working the assessee has earned NCP higher than the alleged KPO comparables and therefore proposed addition should be deleted. 15. He further submitted that without prejudice, considering KPO companies comparable to the assessee transactions, the assessee does not agree with the TPO's approach of cherry picking and applying the margins of KPO comparables for benchmarking the assessee international transactions of advertising services. However, on a without prejudice basis, he submitted that the OP/OC margins earned by the assessee in the two workings submitted i.e., Working for impugned transaction and Segmental working for Craft Division, is higher than the OP/OC margin of KPO comparables selected by the TPO and, therefore, the discussion on comparability of KPO comparables becomes academic. He submitted that the aforesaid is summarized in the table below for easy reference: OP/OC margins of the Assessee for Impugned Transactions (refer paperbook pg. no. 219) OP/OC margins of the Assessee for Craft Division - AE segment (refer paperbook page no 198) Median OP/OC margin of KPO comparables selected by the TPO If at Arm's length Pric....
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....e said cost in the cost base. Moreover, he submitted that the said margin is higher than the alleged KPO comparable companies selected by the TPO. 19. On the other hand, ld. DR of the Revenue relied on the orders of DRP/TPO/Assessing Officer. 20. Considered the rival submissions and material placed on record. We observed that the assessee has submitted the details of international transactions carried out during the year before the AO/TPO and submitted that it has followed TNMM for the Fees paid for various IGS from its AEs. However, for the other services rendered by it to other AEs, it followed Other Method. However, during the assessment, it submitted that it has separate divisions called "Craft division" and maintained separate income and expenses details before TPO. But the TPO has rejected the same by observing that the assessee did not provide the basis for cost allocation between two segments and the assessee followed the billing on cost to cost basis. The TPO proceeded to combine the whole international transactions and charged the same margin determined by him on the basis of bench marking of comparable finalized by Ld DRP. 21. From the above submissions and documents ....