TaxTMI 
TaxTMI 
2026 (8) TMI 744
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....(DRP") grossly erred in conforming the addition proposed by the Ld Dy Commissioner of Income Tax, Circle 12(1), New Delhi (Ld AO) and Ld Additional Commissioner of Income of Income Tax, Transfer Pricing Officer 1(2) ('Ld TPO). In making the said addition, the Ld AO/TPO erred in principal and on facts on the following grounds 1. The Ld AO/TPO grossly erred in understanding the functions performed by the Appellant Company a) The Ld AO/TPO erroneously characterized the Appellant Company, a reseller of customized SIM cards, as a service provider on the basis of information available at the website of Gemalto N.V. (ww.gemalto.com), the parent company. b) The Ld AO/TPO erred in arbitrarily disregarding the fact that the Appellant Company is a 'Tier 3' entity in the group hierarchy, engaged only in peripheral activities viz. selling and distribution of customized SIM cards and is unable to develop any product/solutions on its own. 2. The Ld AO/TPO erred in arbitrarily rejecting the comparables by the Appellant Company. a) The Ld TPO arbitrarily rejected the comparables selected by GDSL, without identifying any specific deficiency or....
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....o, Netherland B.V, in 2004. Axalto, in turn, merged with Gemplus in February, 2007. During the relevant previous year it was a hundred percent subsidiary of Axalto Holding NV, Netherlands. During the period under consideration, the company was known as Gemalto Digital Security Pvt. Ltd. After merger with this business. This company has again merged into Thales Dis India Private Limited on 13th February, 2020 and is now known as Thales Dis India Private Limited. 4. Since the year 2001 the assessee company has been engaged in the business of re-selling chip-based products imported from its Associate Enterprises (AE) of Schlumberger Sema and sold in India. The assessee company purchases from its AE's Point of sale (POS) equipment, Mobile Com SIM, Smart Cards, Pay Phones and sells them in the Indian market. 5. The assessee submits that the Gemalto worldwide Group companies are categorized into three tiers as follows:- i) Gemalto France (Strategic Tier 1- Main Entrepreneur Development Centre) (France)- the highest level in the structure - bears the greatest degree of non-routine business and economic risks within the group. ii) Tier 2- Secondary manufacturing....
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....election of comparable TPO selection of comparables OP/Sales(%) by TPO i Grupa Payoji Electronic Appliances Ltd. i) ORG Informatics Ltd. 7.51 ii HCL Infinet Ltd. ii) Omnitech Info solutions Ltd. 13.11 iii Jainson Corpn. Ltd. iv Priya Lld. v SES Technologies Ltd. vi Videocon Industrial Ltd vii Vivek Ltd. (Pg. 12/ΤΡΟ) Arithmetical Mean 10.31 TP Addition 11,15,08,274 8. At the outset, the ld counsel of the assessee submitted that the assessee company is only engaged in the business of importing from its AEs & selling in India chip based SIM cards, Point of sale equipment and associated terminals etc. to cell phone providers, shops, establishments, petrol stations and banks etc. This functional profile has been consistently accepted by the Tax dept. since AY 2002-03. Assessee is primarily a distributor of finished goods purchased from its AE. It is stated that the imported sim & smart cards are ready-to-use. These cards come with embedded chip memory and application software. Ho....
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.... prayed for exclusion of mis-matched Comparables and inclusion of seven companies chosen by the assessee. 12. The ld AR submitted that the RPM method was applied upto the AY 2002-03 when the CIT(A) changed it to TNMM method. The assessee, since then is following the TNMM method. With respect to comparables, the ld AR submitted that the companies ORG Infomatics ltd and Omnitech Infosolutions Ltd are functionally different whereas the comparable companies chosen by the assessee Priya Ltd and SES Technologies Ltd are proper comparables. In fact, the company Priya Ltd was accepted by the TPO as comparable in AY 2007-08. 13. Per contra, the ld DR vehemently argued that the assessee is functionally different from its AEs which are its holding companies. It is stated that the TPO rightly held the functional profile of the assessee as the assessee customizes the Cards and is not merely the Distributors. The ld DR submitted that the assessee itself rejected the RPM method and has applied the TNMM method. On comparables, the ld DR stated that Omnitech was not chosen as comparable in AY 2007-08. The company SES Technologies Ltd was rejected as comparable as data was not available. 14....
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....1 With respect to Omnitech Infosolutions Ltd., we again agree with the assessee that it is an entirely in-appropriate comparable to the Assessee. We find that there is no rebuttal to the fact that Omnitech is engaged in manufacture, import & export and deals with production, assembling, designing & developing computer peripherals, hardware, software & 'electronic components. It is engaged in business of providing IT services from its Global Delivery centre under Build-Operate-Transfer delivery model & provides 'system integration', Applications Management Services and software services. It has, no trading segment. It carries out R&D & has intangibles like 'omni monitor'. 16.2 With respect to the inclusion of comparables, we find that 5 comparable out of 7 companies have been rejected solely on the ground that contemporaneous data is not available on Prowess/Capitaline in respect of such companies. In such facts and circumstances, we are of the considered view that the TPO shall make effort in collecting data/financial results from the 5 comparable through his internal databases or through powers vested in his office per section 133(6) of the Act. The TPO, if at a....
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....istant Commissioner of Income Tax, Circle 12(1), New Delhi (Ld AO) and Ld Additional Commissioner of Income Tax, Transfer Pricing Officer 1(2) ('Ld TPO"). In making the said addition, the Ld AO/TPO erred in principal and on facts on the following grounds 1. The Ld AO/TPO erred in characterizing the Appellant Company, a reseller of personalised SIM cards, as a predominantly service company. 2. The Ld AO/TPO erred in arbitrarily rejecting the comparables selected by the Appellant Company. 2.1 The Ld TPO arbitrarily rejected the comparables selected by the Appellant Company, without identifying any specific deficiency or insufficiency in the search process adopted by the Appellant Company. 2.2 The Ld TPO erroneously rejected 3 out of 4 comparables selected by the Appellant Company, alleging product dissimilarity. 3. The Ld AO/TPO erred in applying a grossly deficient search/benchmarking process to select fresh comparables. The process adopted by the Ld TPO is based upon inappropriate and insufficient filters and key words, which do not correspond to the business activity of the Appellant Company. 4. The Ld TPO erred in violatin....