TaxTMI 
TaxTMI 
2026 (5) TMI 948
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....dy documentation furnished by the assessee. We note that the issues raised in these grounds are interconnected with the other transfer pricing grounds adjudicated herein below. The contentions raised therein have been examined and dealt with while deciding the respective substantive grounds. Accordingly, no separate adjudication is called for under these grounds of appeal. 5. The issues raised by assessee in Ground Nos. 3.1 and 3.2 are interconnected and pertains to the treatment of certain items as non-operating in nature. 6. The brief facts of the case are that the assessee is a Pvt. Ltd. company. During the period under consideration, the assessee has divided its international transactions into 4 segments namely: (a) Contract Manufacturing of Medical Products (b) Distribution of Medical Products (c) Provision of Software and Engineering Design Services (d) Provision of ITeS Services 6.1 The TPO in computation of margin of assessee and of comparables companies treated provision for doubtful debts and rates & taxes as non-operating in nature which as a result affected the operating profit and therefore PLI of assessee and the comparable....
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....diture incurred by assessee such as custom duties, road tax charges etc. Therefore, the same should be considered as operating expenses. 12. On the other hand, the Ld. DR before us submitted that the Provision for doubtful debts cannot be considered as operating in nature as the same represents a provision for anticipated losses and does not arise from the normal operational activities of the assessee. It was further contended that such provisions are contingent in nature and do not have a direct nexus with the revenue-generating operations of the assessee. Therefore, the same ought to be treated as non-operating in nature. 12.1 With regard to rates and taxes, the Ld. DR submitted that certain components included therein are not directly linked to the core business operations of the assessee and may include statutory levies or charges which are not incurred wholly and exclusively for operational purposes. Accordingly, it was argued that such expenses should not be automatically classified as operating in nature and require careful examination. 13. We have considered the rival submissions of both the parties and perused the materials on record. The dispute relates to the tr....
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.... As far as the software development segment of the assessee is concerned, there is no provision for bad and doubtful debts. The Ld. Counsel for the assessee filed before us copy of the decision of the Hon'ble Karnataka High Court in the case of Principal CIT v. Business Process Outsourcing India Pvt. Ltd., (2018) taxcorp (DT) 73195 (HC Karnataka) wherein in an appeal against the order of the Tribunal holding that provision for bad and doubtful debts should be considered as part of the operating expenditure, the Hon'ble High Court confirmed the order of the Tribunal and dismissed the appeal of the Revenue as one not giving rise to any substantial question of law. 9. In the light of the aforesaid decision, we are of the view that provision for bad and doubtful debts should be treated as operating expense while computing the PLI OP/OC of the comparable companies which ultimately remains for comparison. We hold and direct accordingly." 13.4 Respectfully following the principle of consistency as well as the judicial precedents relied upon by the assessee, we direct the AO/TPO to treat the provision for doubtful debts as operating in nature while computing the operati....
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....O and inclusion and exclusion of certain comparables by the TPO and by the Ld. DRP for computing the ALP of the international transactions carried out with the AE. 16. Ground No. 4.2 is related to Software and Engineering Design (SWD) segment 17. The assessee benchmarked its transactions with AE under SWD segment by adopting TNNM as most appropriate method and further PLI as OP/OC was arrived at 9.96%. The assessee for the comparability analysis selected 17 comparables. 18. However, the TPO was not satisfied with the TP report of the assessee and hence, the TPO rejected the same. Thereafter, the TPO, during the assessment proceedings, rejected 14 comparables out of 17 assessee's comparables. The assessee's comparables accepted by the TPO are detailed as under: (i) CG-Vak Software & Exports Ltd. (ii) Tata Elxsi Ltd. (iii) XS Cad India Pvt. Ltd. 19. Thereafter, the TPO applied own filter and selected additional 15 comparables in addition to assessee's 3 comparables accepted by him. The final TPO's comparables are detailed as under: (i) Hurix Systems Pvt. Ltd. (ii) Evoke Technologies Ltd. (iii) Indianic Infotech Ltd. ....
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....Minds Technologies Pvt. Ltd. (iii) Infomile Technologies Ltd. (iv) Issumation Technologies Pvt. Ltd. (v) KALS information systems Ltd. (vi) Rheal Software Ltd. (vii) Sasken Technologies Ltd. (viii) Yudiz Solutions Pvt. Ltd. Findings of ld. DRP 23. The Ld. DRP, regarding the turnover criteria, observed that high turnover does not have an impact on margins of the company. The Ld. DRP in support of his view relied on various judicial precedents in this regard. Consequently, the ld. DRP rejected the plea of assessee in this regard as well. 23.1 The Ld. DRP regarding the comparables to be rejected based on FAR as per the assessee mentioned above, observed that the said companies are engaged in rendering SWD services in different verticals and very well comparable with the assessee. The same facts were substantiated by the Ld. DRP from the annual report of the comparable companies. The Ld. DRP also referred to the notes to financial statements on revenue recognition wherein the primary source of revenue for comparable companies were from SWD and related services only. Hence, they are similar and functionally comparable to tha....
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....Regarding Infomile Technologies Ltd., the assessee submitted that the said comparable was accepted to be functionally similar by TPO in assessee's own case for AY 2018-19. Hence, there being no change in the facts and circumstances, the same ought to be included in the final list of comparables. 25.5 Regarding KALS information systems Ltd. and Rheal Software Ltd., the assessee submitted that the said comparables are part of search matrix of assessee's TP study, and it was accepted to be functionally similar by TPO in assessee's own case for AY 2018-19. Further, the said comparables are engaged in the business of software development and related trainings. Hence, there being no change in the facts and circumstances, the same ought to be included in the final list of comparables. 25.6 Regarding Yudiz Solutions Pvt. Ltd., the assessee submitted that the said comparable is part of search matrix of assessee's TP study. Further, the said comparable is engaged in the business of software development services. Hence, the same ought to be included in the final list of comparables. 26. On the other hand, the Ld. DR before us strongly supported the order of the TPO as well as the dir....
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....nclusion 5. Aptus Software Labs Pvt. Ltd. Exclusion - Functionally Dissimilar 6. Consilient Technologies Pvt. Ltd. Exclusion - Functionally Dissimilar 7. Cybage Software Pvt. Ltd. Exclusion - Functionally Dissimilar 8. Great Software Laboratory Ltd. Exclusion - Functionally Dissimilar 9. Indianic Infotech Ltd. Exclusion - Functionally Dissimilar 10. Net4nuts Ltd. Exclusion - Functionally Dissimilar 11. Nihilent Ltd. Exclusion - Functionally Dissimilar 12. Orion India Systems Ltd. Exclusion - Functionally Dissimilar 13. Tata Elxsi Ltd Exclusion - Functionally Dissimilar 14. Infosys Ltd. Exclusion - Higher Turnover 15. Larsen and Toubro Infotech Ltd. Exclusion - Higher Turnover 16. Mindtree Ltd Exclusion - Higher Turnover 17. Tata Consultancy Services Ltd. Exclusion - Higher Turnover 18. Wipro Ltd. Exclusion - Higher Turnover 27.2 Regarding the inclusion of Infomile Technologies Ltd., KALS information systems Ltd., Rheal Software Ltd., and Yudiz Solutions Pvt. Ltd., we note that the said comparable companies were rejected by the TPO and further upheld by th....
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.... view, the correct approach lies in appreciating the scheme of section 92C of the Act read with Rule 10B of the Act. The determination of arm's length price is fundamentally based on comparability of functions performed, assets employed and risks assumed. The law does not mandate that comparables must necessarily originate from a particular database search or search matrix. The search matrix is only a tool for identification of potential comparables and cannot be elevated to a statutory condition governing inclusion or exclusion. 27.6 At the same time, we are conscious that transfer pricing analysis is a structured exercise and cannot be rendered arbitrary. The search matrix represents a systematic process involving application of filters and step-by-step elimination. Therefore, comparables cannot be introduced at a later stage in an ad hoc manner, without demonstrating how they satisfy the filters or why they did not emerge in the search process. Such unexplained inclusion would amount to cherry picking, as held in SAP India and Hydro BS India (Supra). 27.7 Similarly, the TPO cannot rely upon the search matrix to justify selection or rejection of comparables without undertak....
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....TAT in assessee's own case for AY 2018-19 in IT(TP)A No. 803/Bang/2022. The same can be substantiated from page 529 of the legal paper book or page 31 of the order of the Hon'ble ITAT. As there has been no material change either in the facts of the assessee or in the functional profile of Infomile Technologies Ltd., the principle of consistency applies, Therefore, the said comparable ought to be included in the list of comparables. Inclusion of KALS information systems Ltd. 27.11 We find merit in the contention of the assessee in including KALS information systems Ltd. The material on record at page 1076 of factual paper book clearly shows that the said comparable is involved in the business of software development and related training. Further, we also note that the said comparable is part of search matrix and the same is evident from accept reject matrix at page 99 of the factual paper book. Further, the said comparable was functionally accepted by the Hon'ble Bangalore ITAT in assessee's own case for AY 2018-19 in IT(TP)A No. 803/Bang/2022. The same can be substantiated from page 529 of the legal paper book or page 31 of the order of the Hon'ble ITAT. Therefore, the said c....
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....d derives major revenue from such activities, and accordingly retained it as a comparable. Hence the said comparable is functionally comparable. 27.16 Before the Ld. DRP, the assessee reiterated the same contentions. The Ld. DRP observed that the assessee had relied on website data to determine the functional profile, and further held, based on the annual report, that the company derives its revenue from rendering services and that its assets are predominantly related to computers and software. Accordingly, the Ld. DRP upheld the inclusion of the said comparable. 27.17 Before us, the Ld. AR submitted that both the TPO and the Ld. DRP erred in including the said company, as it is functionally different and primarily engaged in infrastructure management, network operations, cloud computing, engineering and QA services. 27.18 We have considered the submissions and perused the materials on record. From the documents placed at page 1087 of the factual paper book, it is evident that the said company is engaged in infrastructure management, network operations, cloud computing, engineering and QA services. On the other hand, the assessee is engaged in software development services....
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....erprises. Considering the functional differences as well as failure of the export filter, we find merit in the contention of the assessee. Similarly, the ITAT in the own case (supra) of the assessee not considered as comparable. Accordingly, Consilient Technologies Pvt. Ltd. is directed to be excluded from the list of comparables. Exclusion of Cybage Software Pvt. Ltd. 27.24 The assessee, in response to the show cause notice issued by the TPO, submitted that Cybage Software Pvt. Ltd. is functionally dissimilar and had been rejected by the Hon'ble Bangalore Tribunal in the assessee's own case for AY 2018-19 on account of significant high margins and functional differences. It was therefore contended that the said company is not comparable. 27.25 The TPO, however, relying on the annual report of the company, observed that the entire revenue is derived from the software development services segment and accordingly held the company to be functionally comparable with the assessee. 27.26 Before the Ld. DRP, the assessee reiterated that the said company is functionally different as it is engaged in services such as Gen AI, architectural services, cloud, CRM, enterprise mobilit....
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....omputer programming consultancy and related services, and that the entire revenue is derived from sale of services. It was further observed that there is no revenue from sale of products and that differences in skill set or billing rates within software development services do not materially affect margins. Accordingly, the Ld. DRP upheld the inclusion of the said comparable. 27.32 Before us, the Ld. AR submitted that the company is functionally different as it is engaged in specialised software development services with expertise in cloud applications, communication, identity management and system technologies, as evidenced from the material placed at page 1072 of the factual paper book. 27.33 We have considered the submissions and perused the materials on record. We find merit in the contention of the assessee in excluding Great Software Laboratory Pvt. Ltd. The material on record at page 1072 of the factual paper book clearly shows that the company is engaged in specialised software development services with expertise in cloud applications, communication, identity management and systems technologies. On the other hand, the assessee is engaged in routine software developmen....
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.... derives its revenue from the software development segment and accordingly held it to be functionally comparable. 27.41 Before the Ld. DRP, the assessee reiterated that the company is engaged in offshore development centre services, solution design and development, mobile development and cloud development, and therefore is functionally different. 27.42 The Ld. DRP, referring to the annual report, observed that approximately 98% of the revenue is from software development services and that the main object of the company is to carry on software development services. Accordingly, the Ld. DRP upheld the inclusion of the said comparable. 27.43 Before us, the Ld. AR submitted that the company is engaged in offshore development centre services, solution design and development, mobile development and cloud development, as evident from page 1086 of the factual paper book, and therefore is functionally different from the assessee. 27.44 We have considered the submissions and perused the material on record. We find merit in the contention of the assessee in excluding Net4nuts Ltd. The material on record at page 1086 of the factual paper book clearly shows that the company is engag....
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....ficial intelligence, blockchain, business intelligence, data science and cloud services. On the other hand, the assessee is engaged in software development services. Further, the said company has been held to be functionally dissimilar in the assessee's own case for AY 2018-19 and AY 2016-17 in IT(TP)A No. 803/Bang/2022 dated 17.05.2023 and IT(TP)A No. 285/Bang/2021 dated 03.02.2023. The relevant extract is reproduced as under: "The assessee sought exclusion of Nihilent Ltd. as a comparable on the ground that it is functionally dissimilar vis-à-vis assessee. This objection was also raised before the Ld. DRP but rejected. The assessee relied upon website of the company which is made available at page A412 of the paper book wherein Nihilent Ltd. is shown to be engaged in providing advanced analytics, artificial intelligence, blockchain, business intelligence, data signs, cloud services etc. The annual financials of this company available at page A412 & A413 of the paper book shows that it is rendering Enterprise transformation and change management, Digital transformation services and Enterprise IT services but segmental financials are not available as is apparent fro....
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.... hand, the assessee is engaged in software development services. Considering the functional differences, Orion India Systems Ltd. is directed to be excluded from the list of comparables. Exclusion of Tata Elxsi Ltd. 27.56 The assessee, in response to the show cause notice issued by the TPO, submitted that Tata Elxsi Ltd. has been held to be functionally dissimilar in the assessee's own case for AY 2018-19 in IT(TP)A No. 803/Bang/2022 dated 17.05.2023, and therefore, the same is not comparable. 27.57 The TPO, however, observed that the company provides various services using the same platform of software development and hence is functionally similar to the assessee. It was further held that software development is a broad industry vertical and differences in specific functions or horizontals do not materially affect comparability under TNMM. The TPO also stated that the assessee has selectively objected to this company based on a narrow functional matrix, while not applying the same standard to other comparables. 27.58 Before the Ld. DRP, the assessee reiterated that Tata Elxsi Ltd. is functionally dissimilar and relied on the Tribunal's order in its own case for AY 2018....
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.... market share influence pricing and margins. Though in our considered view, turnover filters cannot be applied mechanically and must depend on the facts of each case, keeping in mind the turnover of the tested entity. The purpose is to select companies with a broadly similar scale of operations, assets and risk profile. This approach is in line with the OECD Transfer Pricing Guidelines in para 3.43 which states that Size criteria in terms of Sales, Assets or Number of Employees. The size of the transaction in absolute value or in proportion to the activities of the parties might affect the relative competitive positions of the buyer and seller and therefore comparability and the guidance note on transfer pricing issued by ICAI in para 5.50 states that under TNMM where margins are to be compared, the margin of a 1,000 crore company cannot be compared with that of a 10 crore company. The two most obvious reasons are the size of the two companies and the relative economies of scale under which they operate. 27.65 Further paragraph 15.4 of the ICAI Guidance Note on Transfer Pricing emphasizes significant differences in company size and turnover, such as comparing Rs. 1,000 crore ent....
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....e to be followed. Since arguments were advanced on the correctness of the decisions rendered by the ITAT Mumbai and Bangalore Benches taking a view contrary to that taken in the case of Genisys Integrating (supra), we proceed to examine the said issue also. On this issue, the first aspect which we notice is that the decision rendered in the case of Genisys Integrating (supra) was the earliest decision rendered on the issue of comparability of companies on the basis of turnover in Transfer Pricing cases. The decision was rendered as early as 5-8-2011. The decisions rendered by the ITAT Mumbai Benches cited by the Ld. DR before us in the case of Willis Processing Services (supra) and Capegemini India (P.) Ltd. (supra) are to be regarded as per incurium as these decisions ignore a binding co-ordinate bench decision. In this regard the decisions referred to by the Ld. counsel for the Assessee supports the plea of the Ld. counsel for the Assessee. The decisions rendered in the case of M/S.NTT Data (supra), Societe Generale Global Solutions (supra) and LSI Technologies (supra) were rendered later in point of time. Those decisions follow the ratio laid down in Willis Processing Services (....
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....that a company having significantly large turnover cannot be compared with a small entity and that size and turnover have a direct bearing on FAR analysis, asset base, risk profile and economies of scale. 27.69 Now coming to the facts of the present case, in this regard we note that the turnover of the assessee is Rs. 996.15 crores from SWD segment whereas the turnover of the comparables namely S. No. Name of Comparable Turnover 1 Mindtree Ltd. Turnover of comparable is Rs. 7967.80 crores 2 Larsen and Toubro Infotech Ltd. Turnover of comparable is Rs. 11,562.60 crores 3 Wipro Ltd. Turnover of comparable is Rs. 50,299.40 crores 4 Infosys Ltd. Turnover of comparable is Rs. 85,912.00 crores 5 Tata Consultancy Services Ltd. Turnover of comparable is Rs. 1,35,963.00 crores are much higher that of the assessee. Accordingly, relying on the judicial discipline supra, we note that he turnover of the companies viz. Larsen and Toubro Infotech Ltd., Wipro Ltd., Infosys Ltd., and Tata Consultancy Services Ltd., are far higher than that of the assessee company. Since the assessee falls under category of companies having significantly hi....
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....based on turnover of more than 2000, 200 to 2000 crores and 1 to 200 by Dun & Bradstreet was not made in the context of comparables under TP Regulations. It was observed that as per such classification of small, medium and large-scale company-based on the range of turnover, an entity having Rs. 1 crore of turnover can be compared to the entity having turnover of Rs. 200 crores. But another entity having turnover of Rs. 199 crores cannot be compared with the entity having turnover of Rs. 201 crores. Therefore, it was held by the Mumbai bench that such classification of turnover range cannot be applied for selection or rejection of comparable entity. In addition, the bench also found that in the said case the company having higher turnover had average margin of 30.74% as compared to company having lower turnover having average margin of 31.36%. Hence the Mumbai bench, considering the aforesaid observation rejected the assessee's grounds for exclusion of comparable companies having turnover exceeding Rs. 200 crores, from the comparable set. 27.73 In our considered opinion, the coordinate bench of Mumbai Tribunal in the above-mentioned case was more focused on mechanical application....
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....omile Technologies Ltd. 7.72% 5 KALS Information Systems Pvt. Ltd. -3.86% 6 Rheal Software Pvt. Ltd. -0.57% 7 Sagarsoft (India) Ltd. 14.62% 8 Yudiz Solutions Ltd. 1.42% Counts 8 Median 3.50% 35th Percentile 1.42% 65th Percentile 7.72% Margin as per WGE 9.96% 27.75 Considering the above detailed discussion, we reverse the order of the authorities below to the extent and in the manner discussed above. Hence, the grounds raised by the assessee are partly allowed. ITeS Segment 28 Coming to Ground No. 4.3, the assessee benchmarked its transaction under ITeS segment by adopting TNNM as most appropriate method and further PLI as OP/OC which arrived 14.46%. The assessee for the comparability analysis selected 18 comparables. 29 The TPO during the assessment proceeding rejected 12 comparables out of 18 assessee's comparables. The assessee's comparables accepted by the TPO are detailed as under: (i) Datamatics Business Solutions Pvt. Ltd. (ii) E-Care India Pvt. Ltd. (iii) Sundaram Business Services Ltd. (iv) Suprawin Technologies Ltd. (v) Ultramarine & Pigments Ltd. -....
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.... assessee in respect of ITeS Segment performs mainly auto sourcing set-ups & maintenance, support on supplier quality and collaboration system, supplier addition, purchase order management, vendor master management etc. Therefore, the said company not comparable and ought to be deleted from the list of comparables. Exclusion of Savitriya Technologies Pvt. Ltd. 31.3 Regard Savitriya Technologies Pvt. Ltd., the assessee submitted that the said comparable is functionally different as it is engaged in the business of providing software development, custom application development etc. Therefore, the said company is not comparable and ought to be deleted from the list of comparables. Exclusion of Vitae International Accounting Services Pvt. Ltd. 31.4 Regarding Vitae International Accounting Services Pvt. Ltd., the assessee submitted that the said comparable is functionally different as it is engaged in the business of providing accounting, book- keeping and auditing services and 98% of the revenue derived by it is from these services only. Therefore, the said company is not comparable and ought to be deleted from the list of comparables. Exclusion Inteq BPO Services Pvt. Ltd.....
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.... to the assessee. 34.2 The assessee further submitted that comparable Microland Limited excluded by TPO and further upheld by the Ld. DRP is liable to be included in the list of comparables of the assessee as the said comparable is involved in the provision of enterprise service management, streamlining digital services which is akin to the ITes activities carried out by the assessee. 35. The Ld. DR on the other hand supported the orders of the TPO/AO and the directions of the ld. DRP and submitted that the companies sought to be excluded by the assessee are all engaged in ITeS/BPO activities and therefore are functionally comparable. It was contended that as per Rule 10TA(e) of the Income-tax Rules, services such as accounting, back-office operations, and BPM services fall within the ambit of ITeS. Accordingly, companies like Anderson Business Solutions Pvt. Ltd. and Vitae International Accounting Services Pvt. Ltd., engaged in accounting and staffing services, are covered under ITeS. Further, Savitriya Technologies Pvt. Ltd., based on its annual report, is engaged in ITeS/BPO services, and Inteq BPO Services Pvt. Ltd. is involved in BPM services akin to back-office support.....
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....essee in excluding Anderson Business Solutions Pvt. Ltd. The materials on record at pages 1092 and 1093 of the factual paper books clearly show that the company is engaged in providing accounting services. On the other hand, the assessee is engaged in ITeS activities such as auto sourcing set-ups and maintenance, supplier quality support, supplier addition, purchase order management and vendor master management. Considering the differences in functional profile under FAR analysis, we hold that the said company is not comparable. Accordingly, Anderson Business Solutions Pvt. Ltd. is directed to be excluded from the list of comparables. Exclusion of Savitriya Technologies Pvt. Ltd. 36.6 The assessee, in response to the show cause notice issued by the TPO, submitted that Savitriya Technologies Pvt. Ltd. is engaged in software development, custom application development, application integration/migration/maintenance and software testing, and therefore, the same is not comparable with the assessee. 36.7 The TPO, however, relying on the annual report, observed that the company is engaged in ITeS and BPO services and accordingly held it to be functionally comparable. 36.8 Befo....
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....er books. 36.15 We have considered the submissions and perused the materials on record. We find merit in the contention of the assessee in excluding Vitae International Accounting Services Pvt. Ltd. The material on record at pages 1096 and 1097 of the factual paper books clearly shows that the company is a global staffing provider for accounting and pension firms worldwide. On the other hand, the assessee is engaged in ITeS activities such as auto sourcing set-ups and maintenance, supplier quality support, supplier addition, purchase order management and vendor master management. Considering the differences in functional profile under FAR analysis, we hold that the said company is not comparable. Accordingly, Vitae International Accounting Services Pvt. Ltd. is directed to be excluded from the list of comparables. Exclusion of Inteq BPO Services Pvt. Ltd. 36.16 The assessee, in response to the show cause notice issued by the TPO, submitted that Inteq BPO Services Pvt. Ltd. is functionally different as it is engaged in core BPO functions and therefore, the same is not comparable with the assessee. 36.16 The TPO, however, relying on the annual report, observed that the co....
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....find merit in the contention of assessee for inclusion of Microland Ltd. The material on record at page 1088 of factual paper book clearly shows that the said comparable is involved in the provision of enterprise service management, streamlining digital services. Further, we also note that the said comparable is part of search matrix of the assessee and the same is evident from accept reject matrix at page 415 of the factual paper book. Accordingly, the said comparable is liable to be included in the list of comparables. 36.23 In view of the above discussion, we reject the order of the TPO/AO insofar as it relates to the exclusion and inclusions of the comparables. As such we direct the TPO/AO to include and exclude the comparables as mentioned in the table below: S. No. Comparables Remarks 1. Datamatics Business Solutions Pvt. Ltd. Exclusion 2. Tech Mahindra Business Services Ltd. Exclusion 3. CES Ltd. - IteS Segment Exclusion 4. Anderson Business Solutions Pvt. Ltd. Exclusion 5. Savitriya Technologies Pvt. Ltd. Exclusion 6. Vitae International Accounting Services Pvt. Ltd. Exclusion 7. TTEC India Customer Sol....
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.... said are and are not functionally comparable. As per the assessee, the list of the companies not fit for comparables mentioned below, (1) Dental Avenue India Pvt. Ltd., (2) IDS Denmed Pvt. Ltd., (3) MDD Medical Systems (India) Pvt. Ltd, (4) Narang Medical Ltd., (5) Schiller Healthcare India Pvt. Ltd, (6) Stryker India Pvt. Ltd, 40.1 The assessee submitted that the said comparables are functionally not comparable to that of assessee. The said comparables are engaged in the trading of dental products, retail trading of medical products, dental services, manufacturing of medical equipment, trading in diagnostics kits, support services, etc. 40.2 Regarding inclusion of Pika Medical Pvt. Ltd., the assessee submitted that the said comparable is functionally comparable and ought to be included in the final set of comparables. 40.3 Regarding Biomedicon Services (India) Pvt. Ltd. and Hicks Thermometers (India) Pvt. Ltd., the assessee submitted that comparables are functionally comparables and were part of search matrix also and therefore, the same ought to be included in the final set of comparables. Findings of the Ld. DRP ....
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.... the nature of products of comparable is in the nature of consumables rather than equipment. Hence, the same should be excluded from the final list of comparables. 43.5 Regarding exclusion of Stryker India, the assessee submitted that the said comparable is functionally not comparable as it is engaged in the business of wholesale trade services. Further, this comparable also fails the RPT Filter. Hence, the same should be excluded from the final list of comparables. 43.6 The assessee further contended that certain comparables ought to be included in the list of comparables as they pass the FAR analysis and other quantitative filters required for TP purposes. 43.7 Regarding inclusion of Biomedicon Services, the assessee submitted that the said comparable is part of search matrix of assessee. Further, it is also comparable as it is involved in the trading of medical and surgical equipment. Hence, the same should be included in the final list of comparables. 43.8 Regarding inclusion of Hicks Thermometers, the assessee submitted that the said comparable is part of search matrix of assessee. Further, it is also comparable as it is involved in the trading of medical and surgi....
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....pted by the TPO. Since, we have already dealt with this aspect in detail in paragraph 27.3 of this order. At this juncture, it is necessary to analyse the details for the comparables for inclusion discussed above in the paragraph given below: Inclusion of Biomedicon Services (India) Pvt. Ltd. and 45.2 We find merit in the contention of the assessee in inclusion of Biomedicon Services (India) Pvt. Ltd. The material on record at page 1100 of factual paper book clearly shows that the said comparable is involved in the trading of medical and surgical equipment. Further, we also note that the said comparable is part of search matrix of the assessee and the same is evident from accept reject matrix at page 432 of the factual paper book. Accordingly, the said comparable is liable to be included in the list of comparables. Inclusion of Hicks Thermometers (India) Pvt. Ltd. 45.3 We find merit in the contention of the assessee in inclusion of Hicks Thermometers (India) Pvt. Ltd. The material on record at page 1101 of factual paper book clearly shows that the said comparable is involved in the trading of medical and surgical equipment. Further we also note that the said comparabl....
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....e company is engaged in providing dental services. On the other hand, the assessee is engaged in the distribution segment and deals in medical products such as medical diagnostic imaging equipment, ultrasound systems, patient monitoring systems, X-ray systems and MRI tables for resale without any modification. Further, the said comparable has been rejected by the TPO himself in AY 2022-23. Considering the functional differences, we direct exclusion of Dental Avenue India Pvt. Ltd. from the list of comparables. Exclusion of IDS Denmed Pvt. Ltd. 45.10 The assessee, in response to the show cause notice issued by the TPO, submitted that IDS Denmed Pvt. Ltd. is engaged in dental cements, fillings and bone reconstruction materials, and therefore is not comparable with the assessee. 45.11 The TPO, however, observed that both the assessee and the said company are engaged in distribution of medical equipment and held that under TNMM, it is not necessary that companies deal in identical products. Accordingly, the company was treated as comparable. 45.12 Before the Ld. DRP, the assessee reiterated that the company is engaged in dental cements, fillings and bone reconstruction mate....
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.....19 We have considered the submissions and perused the materials on record. We find merit in the contention of the assessee in excluding MDD Medical Systems (India) Pvt. Ltd. The material on record at page 1110 of the factual paper book clearly shows that the company is engaged in providing support services such as LED OP lights, wall panels, doors and hospital furniture. On the other hand, the assessee is engaged in the distribution segment and purchases medical products such as medical diagnostic imaging equipment, ultrasound systems, patient monitoring systems, X-ray systems and MRI tables from GEHC manufacturers for resale to external customers without any further modification. Considering the functional differences, MDD Medical Systems (India) Pvt. Ltd. is directed to be excluded from the list of comparables. Exclusion of Narang Medical Ltd. 45.20 The assessee, in response to the show cause notice issued by the TPO, submitted that Narang Medical Ltd. is engaged in manufacturing of medical equipment and that its products are in the nature of consumables rather than equipment. Accordingly, it was contended that the said company is not comparable with the assessee. 45.21....
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.... equipment and further fails the related party transaction (RPT) filter, as its RPT exceeds 25% of its turnover. Accordingly, it was contended that the said company is not comparable. 45.28 The TPO, however, relying on the annual report, observed that the company is engaged in trading of medical equipment and held that it satisfies the RPT filter. Accordingly, the company was treated as comparable. 45.29 Before the Ld. DRP, the assessee submitted that though the TPO has described the company as engaged in trading, its primary activity is wholesale trade services. With regard to RPT, it was contended that the comparable fails the 25% threshold. The Ld. DRP, however, referring to the annual report, held that the company is engaged in trading of medical equipment and further observed that the assessee had adopted a combined approach for computing RPT, whereas it should have been computed individually. Accordingly, the Ld. DRP upheld the inclusion of the said comparable. 45.30 Before us, the Ld. AR submitted that the company is engaged in wholesale trade services of medical equipment, as evident from page 1108 of the factual paper book, and further that it fails the RPT filter....
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....pared the gross margins of the assessee with those of the comparables and Net margin (erroneously) for AY 2018-19. In the absence of any change in facts or circumstances, the principle of consistency requires that the same method be followed. Accordingly, we direct the TPO to compare the gross margin of the assessee with that of the comparables, using the same set of comparables as referred to in the table at para 45.32 of this order. The relevant para of the Hon'ble Bangalore ITAT is reproduced below: "In view of the above, since the facts and law are the same and on the parity of reasoning the TP adjustment in the trading segment is to be deleted. Alternatively, the direction given by the Tribunal for AY 2012-13 in IT(TP)A 703/Bang/2021 and AY 2016-17 in ITA 285/Bang/2021 dated 03.02.2023 and for AY 2017-18 in ITA 291/Bang/2022 dated 15.03.2023 extracted supra be followed for the impugned year as well." 45.35 Considering the above detailed discussion, we reverse the order of the authorities below to the extent and in the manner discussed herein above. Accordingly, the grounds raised by the assessee are partly allowed. 46. Coming to Ground No. 4.4.3, we note that th....
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....n upward TP adjustment was made by the TPO for Rs. 16,45,71,400/- only. 49. The aggrieved assessee preferred to file objection before the Ld. DRP. 50. Before the Ld. DRP, the assessee submitted that the TPO erred in excluding and including certain comparable companies as the said are not functionally comparable. 50.1 The assessee further contended that the TPO erred in applying the export filter of 75% i.e. none of the comparable companies has exports more than 75% of the total turnover. The Export % of total turnover was submitted as follows: S. No. Name of Comparable Export % 1. Bhat Biotech India Pvt. Ltd. 0.21% 2. Allengers Medical Systems Ltd. 8.57% 3. Vision Medicaid Equipments Pvt. Ltd. 1.93% 4. Agappe Diagnostics Ltd. 18.22% 50.2 The assessee with respect to Sahajanand Medical Technologies Ltd. submitted that the said company fails the RPT filter of 25% of turnover. Hence, the same ought to be excluded from the list of comparables. 50.3 The assessee before the Ld. DRP requested for inclusion of 6 comparables namely: (a) Allied Medical Ltd. (b) Centenial Surgical Suture Ltd. (c) Hemant Sur....
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....t the said comparable is a leading manufacturer of Cathether etc. Hence, the same should be included in the final list of comparable. 53.6 Regarding inclusion of Ploy Medicure, the assessee submitted that the said comparable is a part of search matrix. Further, it is engaged in the business of manufacturing medical devices. Hence, the same should be included in the final list of comparables. 54 The Ld. DR supported the orders of the TPO/AO and the directions of the DRP, contending that the selection and rejection of comparables were carried out in accordance with prescribed filters and based on reliable data from audited financial statements. It was submitted that the companies excluded by the assessee were rightly rejected due to failure of filters such as export earnings and related party transactions. The DR further argued that companies like Agappe Diagnostics Ltd. and Sahajanand Medical Technologies Ltd. are functionally comparable as they operate in the same broad segment of medical devices and diagnostics. With respect to inclusion of new comparables, it was contended that the assessee cannot seek inclusion of companies outside the search matrix adopted by the TPO. The....
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.... surgical equipment. Further, the assessee is engaged in contract manufacturing of medical products such as medical diagnostic imaging equipment, ultrasound systems, patient monitoring & X-Ray systems, MRI Tables etc. Therefore, the said comparable stands included on account of functional comparability. Inclusion of Hemant Surgicals Industries Ltd. 55.5 We find merit in the contention of the assessee in including Hemant Surgicals Industries Ltd. The material on record at page 1113 of factual paper book clearly shows that said comparable is engaged in manufacturing of critical medical care equipment like dialysis machine, ventilators, anesthesia machine, etc. Further, the assessee is engaged in contract manufacturing of medical products such as medical diagnostic imaging equipment, ultrasound systems, patient monitoring & X-Ray systems, MRI Tables etc. Therefore, the said comparable stands included on account of functional comparability. Inclusion of Iscon Surgicals Ltd. 55.6 We find merit in the contention of the assessee in including Iscon Surgicals Ltd. The material on record at page 1117 of factual paper book clearly shows that said comparable is engaged in manufactu....
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....id comparable is not functionally similar to the assessee. In support of this contention, reliance was placed on the annual report placed at page 1119 of the factual paper book. 55.10 The Ld. DR, on the contrary, submitted that the mere existence of research and development expenditure cannot be a ground for exclusion of the comparable. It was contended that such expenses form part of normal business operations and do not materially affect comparability under TNMM. The Ld. DR further submitted that the assessee has not demonstrated how the R&D expenditure has significantly impacted the margins of the said company. It was also argued that in the absence of segmental bifurcation, the company continues to remain broadly comparable as it is engaged in similar line of business. Accordingly, the inclusion of the said comparable was justified. 55.11 We have considered the rival submissions of both the parties and perused the materials available on record. We find merit in the contention of the assessee that the comparable has incurred significant research and development expenditure amounting to around 10% of its total other expenses, which indicates involvement in innovation-driven....
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....he case of NXP India (P.) Ltd., we direct the exclusion of the said comparable from the final set of comparables. Accordingly, the TPO/AO is directed to recompute the arm's length price after excluding this company. Exclusion of Sahajanand Medical Technologies Ltd. 55.13 The assessee, in response to the show cause notice issued by the TPO, submitted that Sahajanand Medical Technologies Ltd. fails the related party transaction (RPT) filter and therefore, the same is not comparable. 55.14 The TPO, however, examined the RPT for three years, namely FY 2020-21, 2019-20 and 2018-19, and observed that the RPT sales/revenue and RPT expenses to total expenses are within the acceptable range. Accordingly, the company was treated as comparable. Before the Ld. DRP, the assessee reiterated that the company fails the RPT filter. The Ld. DRP, however, upheld the findings of the TPO and retained the comparable. 55.15 Before us, the Ld. AR submitted that apart from RPT, the company is functionally different as it is engaged in manufacturing of balloon catheter cardiac stents, valves and occludes. It was further submitted that the company has significant research and development expendit....
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....d. 13.30% Count 11 Median 6.21% 35th Percentile 4.32% 65th Percentile 12.04% Margin as per WGE 13.74% 55.18 In view of the above discussion, we reject the order of the TPO/AO to the extent it pertains to the inclusion and exclusion of comparables and direct the TPO/AO to modify the final set in accordance with our findings. The TPO/AO is directed to recompute the arm's length price accordingly. Hence, the grounds raised by the assessee are partly allowed. Ground No. 5 Working Capital Adjustments. 56. During the assessment proceeding, the assessee asked for providing working capital adjustment while calculating the ALP of its international transactions. Therefore, the TPO called upon assessee to show as to how difference in working capital has impacted profit margins of each of the comparable companies. The Transfer Pricing Officer (TPO) during the proceedings found that the assessee was unable to sufficiently explain the differences in working capital between itself and the comparable companies. Specifically, the TPO observed that the assessee did not provide information regarding whether the comparable companies financed their working capi....
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.... Ld. AR further submitted that the Bangalore Bench of the Tribunal, in the assessee's own case for AY 2018-19 in IT(TP)A 803/Bang/2022 dated 17.05.2023, has adjudicated this issue and directed that working-capital adjustment be granted. It was argued that in the absence of any change in facts, the same view ought to be followed for the year under consideration. The assessee also relied upon various judicial precedents to contend that working-capital adjustment is an integral part of TNMM analysis and cannot be denied without proper examination. 62. Per contra, the Ld. DR before us supported the orders of the TPO and direction of ld. DRP and submitted that the assessee failed to discharge the onus of demonstrating the impact of working capital differences on profit margins. It was contended that mere quantitative differences in receivables, payables, and inventory do not automatically warrant adjustment unless their effect on margins is substantiated with reliable data. The Ld. DR emphasized that the assessee did not provide details regarding the cost of funds, financing pattern, or whether comparables incurred working capital costs, which are essential for computing any adjustme....
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....PO without providing for working capital adjustment. The working capital adjustment has not been allowed by the TPO for reasons mentioned in para 18 of the TPO order. The Tribunal in a host of cases has allowed the working capital adjustment on actual basis. Reference is drawn in the case of EIT Services India Pvt Ltd vs JCIT in ITA 3399/Bang/2018 dt.28.09.2021 wherein the Tribunal has held as under: "4.4 We have perused submissions advanced by both sides in light of records placed before us including the decision relied upon by Ld.AR in case of Huawei Technologies India Pvt. Ltd. (supra). 4.5 A reading of Rule 10B(1)(e)(iii) of the Rules read with sec. 92CA of the Act, would clearly shows that the net profit margin arising in comparable uncontrolled transactions has to be adjusted to take into account the differences, if any, between the international transaction and the comparable uncontrolled transactions, which could materially affect the amount of net profit margin in the open market. 4.6 Chapters I and III of OECD Transfer Pricing Guidelines contain guidelines on comparability analyses for transfer pricing purposes. Guidlines on adjustments....
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....lhi High Court in the case of Kusum Healthcare Pvt. Ltd. reported in TS-412-HC-2017(Del)-TP wherein the Hon'ble Court held that separate adjustment on the pretext of o/s receivable is unjustified when the comparables are accepted and TP of underlying transaction i.e. sale of goods is also accepted. Similar reliance was also placed by the assessee on various other judicial prudence. 66.1 Further, the assessee before the Ld. DRP submitted that the interest on trade receivables should not be computed when the trade payables are more in comparison to the trade receivables. Furthermore, the assessee contented that if it all interest is calculated on trade receivables, it should be net of trade payables i.e. Trade receivables less trade payables. 66.2 The assessee further contented that outstanding trade receivables cannot be categorised as an advancement of loan to the AEs. The assessee referred to the OECD guidelines in para 1.143 which emphasizes that tax authorities should recognise and appreciate the actual transactions undertaken by a taxpayer. The assessee relied on the judicial precedent in the Highways Construction Co. Ltd. reported in 199 ITR 702 wherein the Hon'ble Guwah....
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....essee preferred an appeal before us. 69. The Ld. AR before us submitted that outstanding trade receivables arise only as a consequence of the principal international transaction of sale and form part of the ordinary business cycle from AEs and cannot be considered as a separate international transaction. 69.1 The Ld. AR further submitted that the assessee had substantial trade payables and that even the AEs had not charged any interest on outstanding balances payable by the assessee. Therefore, there was no financing benefit extended to the AEs. It was contended that while benchmarking the operating margin under TNMM, the working-capital position had already been considered and, hence, the impact of receivables stood neutralised. According to the Ld. AR, making a separate adjustment towards interest would amount to double counting. 69.2 It was also submitted that outstanding trade receivables cannot be re-characterised as loans in the absence of any loan agreement or separate financing arrangement. The Ld. AR contended that the TPO's approach of treating trade receivables as unsecured advances was contrary to settled principles of transfer-pricing jurisprudence. 69.3 Fu....
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....e treated as a separate international transaction, we find that by virtue of the amendment inserted by way of Explanation to section 92B of the Act, the term "international transaction" has been expanded to specifically include within its ambit "deferred payment or receivable or any other debt arising during the course of business". Therefore, non-charging or under-charging of interest on the excess period of credit allowed to the associated enterprise for realization of invoices would fall within the scope of an international transaction under the said provision. We also note that various judicial precedents have taken a similar view that delay in realization of receivables from AEs constitutes a separate international transaction requiring benchmarking under the transfer pricing provisions. 71.1 However, we are also not ignorant of the fact that mere inclusion of receivables within the ambit of "international transaction" under section 92B does not automatically warrant an adjustment. 71.2 We note that the assessee has contended that being a debt-free company, no notional interest can be imputed on delayed receivables from its AEs. We find merit in this contention. The Hon'....
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.... account of notional interest on delayed receivables is warranted. The addition made by the TPO is therefore directed to be deleted. In view of the above, the ground raised by the assessee is allowed. Ground No. 7, adjustment in relation to royalty payment 72. The brief facts are that the assessee paid Rs. 23,03,28,908/- as royalty to its associated enterprise during the relevant assessment year. The assessee clubbed this royalty payment with its other purchase and sale transactions and benchmarked them together under the TNMM at the enterprise level. According to the assessee, the royalty was paid for using manufacturing technology and technical know- how and therefore it was closely connected with the manufacturing activity and could not be separated for the benchmarking independently. 72.1 However, The TPO did not agree with this approach. According to him, royalty relates to a special and valuable intangible asset and therefore it should be examined as a separate international transaction instead of being aggregated with manufacturing transactions. The TPO further stated that the correct method for benchmarking royalty was the CUP method and not TNMM. 72.1 The TPO a....
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....plains that the royalty was paid in consideration for technology received from the AE, which the Assessee uses in its manufacturing operations. The AE owns the technical know- how for producing sophisticated medical equipment and licenses the same to the Assessee. The assessee does not conduct any research and development and does not have the capability to develop such technology. On the other hand, the AE continuously invests in R&D and upgrades the technology to meet global medical standards and customer requirements. Considerable effort and cost are incurred by the AE in developing this technology. No independent third party would provide such high-end technical know-how free of charge. 74.4 The Assessee relies on orders of the ld. CIT(A) in its own case for AY 2002-03, 2003-04 and 2004-05, where the issue of royalty was examined. In those years, the TPO had made an adjustment in one year but accepted the royalty in other years. The ld. CIT(A) observed that this showed inconsistency in the TPO's approach and held that arm's length price cannot be determined without selecting an appropriate method and identifying comparable uncontrolled transactions. The ld. CIT(A) also state....
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....he manufacturing process. Hence, it cannot be benchmarked separately. 74.12 The Assessee relied on paragraph 3.9 of the OECD Transfer Pricing Guidelines, which recognise that where transactions such as licensing of manufacturing know-how and supply of components are closely linked, they may be evaluated together using the most appropriate method. 74.13 The Assessee placed reliance on judicial precedents where TNMM was accepted for royalty transactions. It relied on the Bombay High Court decision in Cummins India Ltd. vs. Assistant Commissioner of Income-tax reported in [2023] 153 taxmann.com 223 (Bombay)/[2023] 294 Taxman 619 (Bombay) dated [28-07-2023], which held that once TNMM is accepted as the most appropriate method, the TPO cannot apply CUP only to the royalty element. It was also held that closely linked transactions should be benchmarked together and that consistency should be followed in years where the same agreement had been examined earlier. 74.14 Reliance was also placed on the Delhi High Court ruling in Sony Ericsson Mobile Communications India (P.) Ltd. vs. Commissioner of Income-tax -III reported in [2015] 55 taxmann.com 240 (Delhi)/[2015] 231 Taxman 113 (....
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.... Ld. DRP rejected the assessee's arguments on the royalty issue. It held that in an uncontrolled or third-party situation, a contract manufacturer would not normally pay royalty. According to the ld. DRP, royalty should be paid by the entity which actually exploits the intellectual property and earns the residual profits from such exploitation, namely a licensed manufacturer or an entrepreneur manufacturer. 75.1 With regard to the assessee's reliance on earlier orders of the ITAT Bangalore in its own case for AY 2005-06 and 2006-07 IT(TP)A No. 701 and 702/Bang/2021 dated 05.08.2022, where the matter was remanded to the TPO/AO for reconsideration of royalty benchmarking in light of earlier years, the ld. DRP observed that the facts in the present year were different from those earlier years. On that basis, the ld. DRP rejected the assessee's objection and did not accept the reliance placed on the earlier Tribunal orders. 76. Aggrieved by the order/ direction of the AO/ ld. DRP, the assessee preferred an appeal before us. 77.1 The Ld. AR before us submitted that the royalty payment was not an independent transaction but was closely linked with the contract-manufacturing acti....
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.... assessee had relied upon judicial precedents which recognise that where transactions are closely linked, they ought to be aggregated and benchmarked together under TNMM and that CUP cannot be applied in absence of reliable comparable data. 78 On the other hand, the Ld. DR supported the orders of the TPO and DRP, contending that the assessee wrongly aggregated the royalty transaction with manufacturing activities under TNMM without proving that they were closely linked under Rule 10A(d). It was argued that royalty, being payment for use of valuable intangibles, is a distinct international transaction requiring separate benchmarking. The assessee, being a contract manufacturer with limited functions and risks, should not bear royalty costs, which in an uncontrolled scenario would be borne by the principal entity exploiting the intellectual property. The Ld. DR justified the use of CUP as the most appropriate method for benchmarking royalty and submitted that TNMM was inappropriately applied. It was further contended that the assessee failed to demonstrate actual receipt or benefit of technology and did not provide reliable comparables. Therefore, determination of ALP at NIL was j....
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....or recorded any proper reasons for selecting CUP as the most appropriate method in terms of Rule 10C. Determination of ALP at NIL, without identifying any comparable transaction or carrying out a proper benchmarking exercise, is not permissible under the transfer-pricing provisions. 79.5 We further observe that the TPO has essentially questioned the necessity of the royalty payment and proceeded to disallow the same in entirety. It is settled law that in transfer-pricing proceedings, the role of the TPO is limited to examining whether the price paid for a transaction is at arm's length and not to decide the commercial expediency of the expenditure. In the present case, the materials on record show that the assessee utilised the technical know-how received from its AE in carrying out its manufacturing operations. Therefore, the approach of determining the ALP of the royalty at NIL merely on the ground that the assessee is a contract manufacturer cannot be sustained. 79.6 As regards the reasoning adopted by the Ld. DRP that in an uncontrolled situation royalty would not be borne by a contract manufacturer, we are of the view that such a general proposition cannot, by itself, ju....
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....ss Charges to the tune of Rs. 3,41,08,968 and disallowed the remaining amount of Rs. 2,11,18,518 paid towards intra- group service fees and made a corresponding transfer-pricing adjustment at NIL using the CUP method as MAM. 81. Aggrieved assessee filed objections before the DRP. 82. The assessee submitted that the intra-group service transactions were tested as part of the overall segmental profit and loss while benchmarking its main business activities such as contract manufacturing, distribution, engineering design, software services and ITES. 82.1 The assessee submitted that the Ld. TPO wrongly stated in the TP order that the intra-group services were routine in nature, constituted shareholder activities and were duplicative. It was further alleged by the TPO that the assessee already had its own accounting team and that no documentary evidence had been maintained for the services allegedly provided by the AEs. On this basis, the TPO treated the services as shareholder activities and benchmarked the entire expenditure at NIL. 82.2 In response, the assessee explained that during the year it had availed several services from its group companies. The broad nature of th....
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....be considered as sufficient and appropriate evidences. 83.1 The Ld. DRP also concluded that the intra-group services claimed by the assessee fall within the category of shareholder activities as described in the OECD Guidelines. On this basis, the ld. DRP upheld the action of the TPO in treating the services as shareholder in nature and in applying the CUP method as the most appropriate method for benchmarking the transaction. Hence, the ld. DRP rejected the objections of the assessee. 84. Aggrieved by the order/ direction of the AO/TPO/ Ld. DRP, the assessee preferred an appeal before us. 85. The Ld. AR before us submitted that the TPO erred in making a transfer-pricing adjustment of Rs. 2,11,18,518/- in respect of intra-group service charges by determining the arm's length price of such services at NIL and by holding that no benefit was derived by the assessee. It was submitted that this conclusion was reached despite the fact that the services were admittedly availed by the assessee and were demonstrably used to optimise its operations, reduce costs and improve its competitive position in the market. 85.1 The Ld. AR further submitted that the services were not routin....
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....agomen Legal Service Costs 59,16,811 6 GE Infrastructure Hungary Holding Kft. Hungary Accounting Support Services - Treasury 17,90,431 7 GE Medical Systems Information Technologies Inc. United States Accounting Support Services - FRT 16,95,783 8 GE Healthcare Australia Pty Limited Australia Financial & Accounting Services Rebill 16,26,080 9 GE Medical Systems Trade and Development Shanghai Co Ltd China Enterprise Standard Billing from Global Operations 14,13,724 10 GE Medical Systems Korea Korea Translation Services (Serbian, IFU, User Manuals, French CBT) 7,77,113 11 GE Operations Indonesia PT Indonesia Controllership / Financial & Accounting Services 7,69,503 12 GE Hangwei Medical Systems Co Ltd China Rework Charges for RMA SVCT Collimators 30,381 Total 2,11,18,518 87.2 The services included accounting and finance support, legal and regulatory assistance, technical documentation, marketing support, enterprise-wide operational services and re-work charges. These services, in our view, are in the nature of operational and business suppor....
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....28,155/-. The balance sum of Rs. 57,68,629/- was stated by the assessee to be outside the scope of TDS under the applicable provisions, on the ground that such payments related to purchase of equipment or goods and rent expenses incurred in foreign countries, on which tax was not deductible in India. 88.1 However, the AO did not accept the assessee's explanation regarding non-deduction of tax at source on the amount of Rs. 57,68,629/-. The AO accordingly invoked section 40(a)(ia) of the Act and disallowed 30% of the said amount, being Rs. 17,30,589/-, and added the same to the total income of the assessee. 89. Aggrieved assessee filed objections before the Ld. DRP. 90.1 Before the DRP, the assessee, more or less, reiterated the same before the Ld. DRP as done before AO. 91. The Ld. DRP observed that the assessee did not submit the sufficient evidence to substantiate its claim and confirmed the addition made by the AO 92. Aggrieved assessee preferred an appeal before us. 93. The Ld. AR submitted that a detailed breakup of the disputed rental expenses amounting to Rs. 57,68,629/- was furnished before the lower authorities, containing particulars such as description ....