AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (12) TMI 1495
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....inst the order dated on 30 May 2024 passed by the Additional Joint/Deputy/Assistant Commissioner of Income-tax/Income-tax officer, National Faceless Assessment Centre, New Delhi, Assessment Unit, Income-Tax Department (learned AO") issued under Section 143(3) read with Section 144C(13) read with Sections 144(B), ('final assessment order"), after considering the adjustments proposed by the Asst. Commissioner of Income Tax, Transfer pricing Officer-1(2)(1), Mumbai ('learned TPO') in his order passed under Section 92CA(3) of the Act and in pursuance of the Directions issued by Dispute Resolution Panel-1 (DRP- 1) ('Hon'ble DRP"), Mumbai, on the following grounds: On the facts and circumstances of the case and in law, the learned AO/Hon'ble DRP/learned TPO, has: General Ground 1. erred in assessing the total taxable income of the Appellant at INR 17,99,47,172 as against of Rs. 9,98,90,730 as reported in the ROI filed by the Appellant, Time barred proceedings 2 the assessment order dated 30 May 2024 passed by the learned AO under Section 143(3) of the Act is beyond the time limit prescribed under Section 153 of the Act ....
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....n asset light company (asset to tangible assets ratio of 0%) Le. a Non Vessel Owning Common Carrier (NVOCC) without prejudice to the above, the company also fails RPT to sales filter of 25% for FY 2018 19 and FY 2017-18 and hence ought to be at least rejected for these years 10 erred in accepting Sanmar Shipping Limited in the final set of comparables disregarding the fact that the company is a significant asset owning company with assets to tangible assets ratio of-76% as compared to the Appellant which is a NVOCC (with assets to tangible assets ratio of 0%) engaged in air and ocean transportation services. 11. erred in accepting Balurghat Technologies Limited in the final set of comparables disregarding the fact that the company is functionally different as it is engaged in various activities and does not report segmental information for freight forwarding services and is a significant asset owning company with assets to tangible assets ratio of-39% as compared to the Appellant which is a NVOCC (with assets to tangible assets ratio of 0.00%) engaged in air and ocean transportation services. 12. erred in accepting & companies-PCC Logistics Private Limite....
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....late Tribunal decide this appeal according to law." 2. Brief facts of the case are that assessee is a subsidiary of Panalpina World Transport (India) Private Limited. The assessee is merged with DSY Air & Sea Pvt Limited, i.e. with its holding company. The assessee is engaged in freight forwarding services, specialised in international A&C freight consignments and associated services. The assessee, while filing return of income for A.Y. 2020-21 declared income of Rs. 9.98 crores. The case was selected for scrutiny. The assessee reported certain international transaction with its associated enterprises (AEs). Thus, the assessing officer (AO) made reference to Transfer Pricing Officer (TPO) for computation of arm's length price. The TPO, in its order passed u/s 92CA(3) dated 28/07/2021, proposed the adjustment of about Rs. 8.00 Crore in respect of international transactions relating to 'Provision of Freight Forwarding Services'. On receipt of report of TPO, the AO issued a draft assessment order by assessing total income under section 144C(1) of the Act dated 25/09/2023, proposing the adjustment on the basis of order of TPO. On service of draft assessment order, the assessee exerc....
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.... 1.54% 4 Cargo Care Shipping & Forwarding (India) Pvt Ltd 2.40% 5 Expo Freight Pvt Ltd 2.75% OP / OC (%) Arithmetic Mean 1.81% 4. The TPO undertook the proceedings and accepted TNMM as most appropriate method. However, he rejected 4 comparables without specifying any reasons, viz. (i) Unique Logistic Intl Ltd (ii) Connect Cargo Pvt Ltd, (iii) Lords Freight India Pvt Ltd and (iv) Cargo Care Shipping & Forwarding (India) Pvt Ltd 5. The TPO introduced his following 17 additional comparables and determined arm's length range to be 3.09% to 4.3% with a mean margin of 3.9% and suggested transfer pricing adjustment of Rs. 8.005 Crore. The TPO introduced following new comparables; Sr. No Name of comparables Margins as pr TP Order 1 Prakash Parcel Services Ltd. (Karnataka) 0.68% 2 Yusen Logistics (India) Pvt. Ltd. 0.73% 3 Continental Carriers Pvt. Ltd. 1.57% 4 Jet Freight Logistics Ltd. 1.75% 5 North Eastern Carrying Corpn. Ltd. 2.20% 6 M+R Logistics (India) Pvt. Ltd. 2.59% 7 Expo Freight Pvt. Ltd. (common comparable) 3.....
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....asset light company in accordance with Rule 10B(2) of Income Tax Rules, 1962 which states comparability must be assessed based on functions perform, asset employed and risk assumed (FAR) of the comparables vis-a-vis the assessee. For 14 comparables that is M+R Logistics (India) Pvt. Ltd., the ld. AR of assessee submits that audited financial statement was not available in the public domain. The ld. AR furnished detail chart of all 14 comparable companies which is sought to be excluded from final set of comparable narrating functional difference and decision of various tribunal or higher courts wherein such comparable companies were accepted as engaged in road transportation and / or rejected on the basis of fact that they owned significant assets. 7. On the other hand, the ld. CIT-DR for the revenue supported the order of TPO and DRP. The ld. CIT-DR for the revenue submits that for applicability of TNMM, exact functional similarity is not needed and some functional differences can be tolerated. To support such submissions relied on the decision Mumbai Tribunal in case of Huhtamaki India Limited vs DCIT in ITA No. 8042/M/2029 and particular para 4.19 of such decision and the deci....
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.... held that under TNMM what is needed is functional similarity and not sectoral or industrial similarity. Even in respect of broad functional similarity in an entity level comparison if 75% or more of the revenue is from similar functions, functional comparability is considered adequate for application of TNMM. As most entities might have some minor part of their revenue from other functions and functions also and insisting on a 100% matching might not return any comparables at all. The TPO has taken care of the fact and used a filter where companies having less than 50% of their sales from services were excluded. This filter is not challenged by assessee and application of this filer would mean as long as 50% or more of the sales of the potential comparables are from comparables function segment of services auxiliary to the transportation, the acceptable comparability is there. Further, as long as the assessee does not challenge the filter itself they cannot challenge the individual comparables on this ground. The ld. Sr DR submits that AR of assessee made his submission for exclusion of certain comparables on the ground that such comparables owned significant assets. The asset do ....
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.... comparables. 9. We find that the ld AR of the assessee primarily in his submissions objected about inclusion of 13 comparable, which is discussed below, (1) For exclusion of North-Eastern Carrying Corporation Limited, we find that TPO included this comparable by taking view that this company is offering domestic, international and commercial goods transportation and having warehouse services and is comparable with assessee. The ld. DRP upheld the action of TPO by taking view that asset bases are broadly comparable and TNMM allows broad comparability. The financial result of this comparable is available at page no. 687 to 695 of paper book (PB). The asset base of comparable is not much large and is not relevant as the assessee has assessed to transport vehicle on hire. The asset owning company face downward pressure on merging due to interest cost. On considering the submissions of both the parties we find that this comparable is not comparable with assessee company as the same is engaged in road transportation having warehousing operations. The assessee is only engaged in air and ocean freight services and does not have own warehouse. The TPO, himself rejected four of ....
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....ctions they will report a lower profitability due to depreciation claim. Hence, the comparability of the applicant with an asset-heavy concern is beneficial to the assessee as the reported PLI are reduced. Furthermore, the DRP also held that the in past their predecessor have held that the assessee is a part of a large conglomerate and the asset base of only one entity in the group ought not be looked at. The financial result of this comparable is available at page no. 1384-1385 of PB. We find that Mumbai Tribunal in Aramex India Private Limited vs DCIT in ITA No. 6749/M/2017 dated 18.05.218 rejected the comparable owning significant asset. The same view was taken in DCIT vs DHL Logistics P. Ltd. in ITA No. 1385 & 1923 of 2016 dated 10.08.2020. Thus, in our view, this comparable is also not comparable with assessee company. (4) For Balurghat Technologies Limited, we find that TPO included this comparable without any specific finding as can be seen at page no. 13 at serial no. 9 of list of comparable. The ld. DRP upheld the action of TPO by taking view that sector of assessee and comparable company are same. The asset bases are broadly comparable and the TNMM allows broad c....
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....ncluded this comparable by holding that this company is engaged in custom brokerage, air freight, express freight, sea freight, document processing, multi modal facility, 4PL & supply chain management, packaging and warehousing tracking and tracing facility. The ld. DRP has not given any specific finding. We find that financial statement of this comparable is available at page no. 794 to 802 of paper book. This comparable company is engaged in various services, such as 4PL, supply chain management, packaging and warehousing. On the other hand, the assessee company is in air and ocean freight services. Thus, not comparable with this comparable company. The AO/TPO is directed to exclude is comparable. (8) For Premier Road Carriers Limited, we find the TPO included / accepted this comparable by holding that this comparable is engaged in integrated logistics solutions, project transportation, storage solutions and over dimensional cargo and comparable with the assessee. The ld. DRP confirmed the action of assessing officer with the same view as in respect of comparable no. 4, 5 & 6. We find that financial details of this comparable are available at page no. 804 to 809 of paper....
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....he assessee is an asset light company. In our view, this comparable is not a good comparable with the assessee company. The AO/TPO is directed to exclude this comparable. (11) For Om Logistic Limited, we find that TPO included / accepted this comparable by holding that this company provides logistic support and solution and also engaged in transportation, warehousing facilities and logistic services and comparable with assessee. The ld. DRP confirmed the action of TPO by holding that this comparable is also in the same sector. Asset bases are broadly comparable and the TNMM allows broad comparability. The asset base of this comparable is not much large and that asset base is not relevant. It was also held that issue of factual comparability is factual issue and needs to be examined each year, as the business conditions and models may changes every year. We find that financial statement of this comparable company is available at page no. 829 to 842 of paper book. This company is engaged in logistic and warehousing services and have multimodal logistic company. This company owns significant asset and owned a fleet of 700 vehicles. In our view, this comparable is not a good c....
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....entsity or balance sheet adjustment are intended to account for the fact that amount of capital employed in a business affects its economic profit. Such type of adjustment is also allowed by some tax administrator while making transfer pricing adjustment. The adjustments are made at different level of accounts receivable and account payables between the assessee and the tested party and the comparable companies. Rule 10B(1)(e)(iii) of the Income Tax Rules, 1962 also provides that adjustment should be made to the profit margin of independent comparables companies to take in to account the differences in functions and risk. To support his submissions, the ld AR of the assessee relied on the following decisions; * Visual Graphics Computing Services (India) Pvt Ltd [TS-709-HC-2020 (Mad)-TP (High Court), (2020). * Red Hat India Private Limited Vs ACIT (ITA No. 1379/Mum/2021, * Norton Life Lock Software Solution Private Limited Vs ACIT (ITA No. 7374/Mum/2017. 13. On the other hand, the ld Sr DR for the revenue supported the order of lower authorities. 14. We have considered the rival submissions of both the parties and have gone through the orders of lowe....