TaxTMI 
TaxTMI 
2021 (11) TMI 1232
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....he Hon'ble DRP have erred in rejecting the Arm's Length Price ("ALP") determined by the appellant. 3. The Ld. TPO, Ld. AO and the Hon'ble DRP have erred in rejecting the use of data pertaining to multiple years, and in applying data pertaining only to the current year, i.e. of Financial Year 2011-12, to benchmark international transactions undertaken by the appellant. 4. The Ld. TPO, Ld. AO and the Hon'ble DRP have erred in rejecting / modifying certain quantitative filters applied by the appellant and in introducing certain incorrect additional quantitative filters for selection of comparables to benchmark the international transactions undertaken by the appellant. 5. The Ld. TPO / Ld. AO / Hon'ble DRP have erred on facts and in law in applying the quantitative filters proposed by the Ld. TPO over the final set of comparables chosen by the appellant instead of the initial set of potential comparables / full population of potential comparables. 6. The Ld. TPO, Ld. AO and the Hon'ble DRP have erred in rejecting comparables selected by the appellant to benchmark its international transactions on the basis of incorrect reasons such as peculiar econo....
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..... The assessee has entered into certain international transaction and therefore the matter was referred to the ld TPO in terms of section 92C of the Act to determine the arm's length price. The ld TPO passed the order u/s 92CA (3) of the Act on 28.01.2016. The ld TPO determined the arm's length price of the international transaction related to "Provision of marketing support services" of Rs. 2,11,26,934/- and therefore the same was added to the total income of the assessee and draft assessment order was passed on 16/202/2016 at an income of Rs. 4,75,52,550/-. 6. Assessee preferred objection before the ld DRP-1, New Delhi. The objection of the assessee were disposed off vide direction dated 27/06/2016. The ld TPO passed an order giving direction to the above ld DRP and shortfall of the transfer price of the ALP was determined at Rs. 1,85,39,276/-. Consequent to that the assessment order was passed determining total income of Rs. 4,49,64,896/- against the return of income of the assessee at Rs. 2,64,25,620/-. Thus, the only addition was made on account of arm's length price on international transaction where the addition was made of at Rs. 1,85,39,276/-. 7. The appe....
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.... ld TPO rejected the transfer pricing analysis and adopted the current year data. He retained only two comparables namely ICRA Management Consulting Services limited having a margin of 6.62% and in Inmacs Management Service Private Limited whose margin is 51.02 %. The average of the margin determined at 28.82% and he computed the adjustment of Rs. 2,11,26,934/- 12. The ld DRP directed the ld AO to keep foreign exchange loss as operating expenditure and directed to allow the working capital adjustment. Accordingly, the average margin of the comparable was completed at 29.23% and after granting working out capital adjustment, it was computed at 27.12%. Accordingly, the shortfall of transfer price was determined at Rs. 1,85,39,276/-. 13. The only dispute raised by the assessee is with respect to the exclusion of following three comparables by the ld TPO. a. Cyber Media Research Private Limited b. Indian Tourism Development Corporation Limited c. In House Products Ltd (Segmental). 14. The ld AR submitted that a. Cyber Media Research Limited is excluded by the TPO for the reason of decline in sales. It was stated that the ld DRP has accepted ....
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.... the basis of segmental data. 39. Per contra, the ld. DR read the observations of the TPO for excluding this company. 40. We find that the main reason for excluding this company given by the TPO is that it also runs a knowledge process outsourcing centre. Hence this company is more akin to an ITES provider. In our considered view, since the segmental data is available for healthcare information, the same can be compared with the assessee. We, accordingly, restore this issue to the file of the TPO. The TPO is directed to decide the inclusion of this company afresh after considering the segmental data of this company." 17. In paragraph 40 the coordinate bench held that since the segmental data of this company is available for healthcare segment same cannot be compared with the assessee. It was further stated that comparable company is more akin to its ITES provider and hence it is functionally comparable. Exclusion by the ld TPO was only for the reason that no data was available of the above company of respective segment for this year. Now the ld AR submitted that the data is available. Hence, now there cannot be any dispute that the functional profile of the com....
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.... not necessarily a true indicator of comparability of companies or their profitability. It is the say of the ld. counsel for the assessee that since the assessee has used TNMM to bench mark the impugned transactions, there is no need to arbitrarily reduce the number of comparables by applying employee cost to total cost ratio as long as the companies selected for comparison are functionally comparable to that of the tested party. 44. We find force in the contention of the ld. counsel for the assessee. We are of the considered view that if the functions are comparable with those of the assessee, then the companies cannot be excluded as they fail to pass the employee cost filter. Considering the business profile of the assessee, and in particular the marketing support services provided by it to its AE, we do not find any merit in applying employee cost filter of 25%. We, therefore, direct the TPO to include all those companies which are otherwise functionally comparable but fail to pass the employee cost filter." The co-ordinate bench has held that the functions of the ITDC with respect to the ARMS division function are comparable with the assessee. The segmental data are....