2025 (8) TMI 902

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.... 26,78,74,040/-. The case was selected for scrutiny and statutory notices were issued and served upon the assessee. Subsequently, the case was referred to the TPO after obtaining necessary approvals. As per Form 3CEB and TP study report, following are the international transactions and financial statements: 4. Further, financials of the tax payer as reconciled by the TPO are as under: 5. The tax payer has reported international transaction in respect of provision of marketing support services and technical support services. The ALP of the international transactions for the services provided to the AEs has been determined by applying Transaction Net Margin Method (TNMM) stating to be at arm's length. The OP/OC was considered as the PLI. The data base was used was Prowess and Capitaline. The 5 companies selected as comparable companies and arithmetic mean were calculated at 11.75after applied certain filters as set out in the T.P. study and its written synopsis. However, the learned TPO did not accept the TP study filed by the assessee and he started fresh search applying the data base under Prowess and Capitaline and applied certain filters as per TP order u/s 92CA of the Act.....

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....sment order, the Appellant filed an appeal before the Commissioner of Income Tax (Appeals) ("CIT(A)") on 01.03.2018. The CIT(A) vide order dated 11.06.2024 dismissed the appeal preferred by the Appellant in toto. 5. Aggrieved by the order passed by the CIT(A), the Appellant has filed the present appeal before this Hon'ble Tribunal. APPELLANT'S SUBMISSIONS: A.1. Details of the Appellant's international transactions: Particulars Amount in Rs. Outcome of rectified TP Order Provision of marketing support services 160,37,75,6 86/- Accepted to be at arm's length Provision of technical support services 69,31,31,91 4/- Adjustment of Rs. 2,39,71,904/- Purchase of fixed assets 8,10,112/- Accepted to be at arm's length Reimbursement of expenses paid 9,55,56,688 /- Reimbursement of expenses received 1,16,38,500 /- Reimbursement received towards ESOP and Restricted Stock Unit 2,24,79,418/- Remittance on behalf of employees towards Employee Stock Purchase Plan 1,31,84,267/- A.2. Net mark-up on cost earned by the Appellant as computed in the TP Order: Operating Income Rs. 162,17,00,000/- Opera....

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.... Companies having positive net worth - selected. 8. Companies reporting loss for any 2 years of the last 3 years - rejected. 9. Companies whose export revenues are more than 50% of revenue - selected. 10. Companies failing the FAR analysis - rejected. Comparables selected by TPO and their arithmetic mean: Sl. No. Name of the Company OP/O C (in %) 1 Acropetal Technologies Ltd. (segmental)  15.63 2 Quest Global Engineering Pvt. Ltd. 18.35 AVERAGE MARK-UP 16.99 A.7. Computation of arm's length price by the TPO and adjustment made: Arm's Length Mean Mark-up on cost 16.99% Operating Cost 61,29,60,000/- Arm's Length Price @ 116.99% of operating cost 71,71,01,904/- Price Received 69,31,30,000/- Variation in price 2,39,71,904/- 3% of price received 2,07,93,900/- Shortfall being adjustment u/s. 92CA Rs. 2,39,71,904/- B. ORDER OF THE CIT(A) The CIT(A) rejected the contentions raised by the Appellant in toto and dismissed the appeal. C. List of comparables pursuant to order passed by the CIT(A) are as follows: SI. No. Name of the Company 1. Acrop....

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.... the IT services segment of the Company is comparable to the Appellant. Detailed submissions are placed at pages 97-98 of the paperbook. Therefore, it is submitted that DCM ought to be included in the final list of comparables. GROUND NO. 3.2.2: Inclusion of Telecommunication Consultants India Limited ("TCIL"): It is submitted that company was excluded by the TPO for the reason that the annual reports of the company was not available for the assessment years 2013-14 and 2014-15. The TPO excluded this company relying on the annual report for the assessment year 2012-13. In this regard, it is submitted that the annual report of the Company for assessment year 2014-15 is available in the public domain. The copy of the annual report was furnished by the Appellant before the TPO and therefore, the finding of TPO that the annual report for the assessment year 2014-15 was not available is wholly erroneous and contrary to the material on record. Further, it is submitted that the TPO has considered the entity level details regarding the functionality of TCIL while the Appellant has provided details specifically relating to the consultancy and ser....

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....mplete installation supports for the newly purchased software/ hardware as per the instruction from EMC ISI. In addition, the Company also provides annual maintenance support services as may be required - however EMC ITS India does not enter into any warranty contracts with customers which remain the sole responsibility of the EMC Group. • Residency Services: EMC ITS India provides residency services, wherein it recruits skilled manpower (referred to as residents) from the market based on the skill set requirement of the customer and places them in customer locations. The residents are employees of EMC ITS India and are generally engineers by qualification. These residents work on-site at the customer's site under the operational supervision of the customer, but under the overall control of EMC ITS India. The residents manage the data centre of the customer - rendering services in the nature of maintaining and performing daily operational tasks of Open Systems and/or Backup Environment, providing technical support, etc. 3.2.2.3. General Management Functions: The functions addressed below are common functions that are carried out by any bu....

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....necessary documents to substantiate the claim for inclusion. 14. In the result, appeal filed by the assessee is partly allowed for statistical purposes. Pronounced in the court on the date mentioned on the caption page. ============= Document 1 3. International Transaction as per 3 CEB report and TP documentation :- The following are the international transactions entered into by the taxpayer with its associated enterprises: As per TP Document As per 3CEB Particulars Amt. (Received / Receivable) Amt. (Paid / Payable) Provision of marketing support services 1603775686 1603775686 Provision of technical support services 693131914 693131914 Purchase of fixed assets 810112 810112 Reimbursement of expenses paid 95556688 95556688 Reimbursement of expenses received 11638500 11638500 Reimbursement received towards Employee Stock Option Plan (ESOP) and Restricted Stock Unit ('RSU') 22479418 22479418 Remittance on behalf of employees towards Employee Stock Purchase Plan (ESPP) 13184267 13184267 Total 2331025518 109551067 2440576585 Document 2 4. The financials of the taxpayer for the F.Y. 2013-14 as per TH document is as under: Partic....