TaxTMI 
TaxTMI 
2019 (10) TMI 1638
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.... with provisions of the Act and modifying the economic analysis for determination of arm's length price ('ALP') of the impugned international transaction to hold that the same is not at arm's length. 3. The learned TPO / AO / DRP have erred in: a. Not accepting the use of multiple year data, as adopted by the appellant in its Transfer Pricing ('TP') documentation; and b. Determining the arm's length margins / prices using data pertaining only to financial Year ('FY') 2008-09 which was not available to the assessee at the time of complying with the Indian TP documentation requirements. 4. The learned TPO / AO / DRP have erred in adopting a separate benchmarking approach by: a. Bifurcating the impugned transaction into two separate transactions/ activities; namely 'marketing support services' and 'technical support services'; and b. Application of inappropriate keywords for searching comparable companies. 5. The learned TPO / AO / DRP have erred in rejecting certain comparable companies selected by the appellant by applying inappropriate comparability criteria such as : ....
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.... 4 Reimbursement of expenses by AEs BNR 5,116,322/- 6. The entire quarrel before us in relation to the provision of marketing and sales support services. In this segment, Polycom offers professional and maintenance services to assist end-users in implementing and managing Polycom group's video conferencing, voice communication and network systems products, as mentioned elsewhere. These services are rendered directly by Polycom group through its channel partners. It also offers installation and implementation services and a range of training offerings. 7. From the above chart, it can be seen that during the year, the assessee had entered into an international transaction of provision of market and sales support services amounting to Rs. 17,92,21,762/-. The said transaction was bench marked using Transactional Net Margin Method [TNMM] as the Most Appropriate Method with return on operating cost as the Profit Level Indicator. 8. In TP study report, the assessee has shown margin of 9.54% on cost and for benchmarking of this transaction, the assessee has used a set of 15 comparables. The average margin of these comparables is 8.57%, and since the margin of the asse....
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....CA Business Services Pvt. Ltd .: This company provides payroll supporting service. Therefore, it is broadly comparable to the assessee. 8.2.6 Killick Agencies & Marketing Ltd .: This company provides marketing support service. Therefore, it should be retain in the list of comparables. 8.2.7 Orient Engineering & Commercial Company Ltd .: These companies provide technical services, among other things, to its clients. These activities are comparable to the activities of the assessee. 8.2.8 TSR Darashaw: This company is also in the business of payroll, record management and registrar and transfer agent for its clients. These activities are comparable of the activities of the assessee. 8.3 The following comparables companies rejected/ accepted by the TPO in Technical Support Services are discussed in the following paragraphs. 8.3.1 Archohm Consults Pvt. Ltd .: Characteristics of the services provided by the company are not comparable, accordingly, the same cannot be considered as a comparable company. 8.3.2 Engineers India Ltd., L&T Ramboll Consulting Engineers Ltd., Rites Ltd. and Zipper Trading Enterprises Ltd. These compa....
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....le has been getting grant to only carry our certain projects and same has not effect its overall profitability. Therefore, this company should be retained in the list of comparables. 12. Aggrieved by this, the assessee is before us. 13. At the very outset, the ld. counsel for the assessee stated that though during the TP assessment proceedings he has strongly objected to the segregation of market support services and technical support services, but for the year under consideration only he would not seriously object to the said segregation. The ld. counsel for the assessee further stated that he is objecting for inclusion of 5 comparables in marketing support services and 3 comparables in technical support services. 14. Placing reliance on the decision of the lower authorities, the ld. DR vehemently stated that all the objections of the assessee have been duly considered by the DRP and, therefore, final set of comparables taken by the TPO should be upheld. 15. We have given thoughtful consideration to the orders of the authorities below. The business profile of the assessee has been discussed elsewhere. We will now consider the comparables under marketing support service....
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....d ones rendering Apitco Ltd., non-comparable with the assessee. 12. It is submitted by Ld. DR that as rightly recorded by the Ld. TPO, most of the services rendered by the Apitco Ltd., are in the nature of business services and predominantly Apitco Ltd., is a company providing various support services for allotment of tourism and industry. Further, it could be seen that the margins of Apitco Ltd., are quite consistent and in the range of 37% to 49% from FY 2005-06/02/2009-10 in this era of volatile business conditions, forex fluctuations etc. Basing on these observations made by Ld. TPO, Ld. DR justifies the inclusion of this company in the set of comparables. 13. As could be seen from the annual report of this company, is company is one of the 18 TCOs was formed by the key national level financial institutions in association with state-level institutions and banks, and accordingly being a government enterprise Apitco Ltd., was established to provide technical services to other government companies and body corporate. Further this company is engaged in providing services such as asset reconstruction and management, clustered allotment for mega footmarks, and envir....
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....lowing the ratio laid down in the above decisions hold that Apitco Ltd., is not a good comparable with the assessee and is accordingly liable to be excluded. We, therefore, directly Ld. TPO to exclude this company from the finalist of comparables to benchmark the international transaction relating to the market support services provided by the assessee to its AEs." 17. Considering the business profile of the appellant-company, vis a vis that of Aptico Limited, in the light of the decision of the co- ordinate bench, we direct the TPO to exclude this company from the final set of comparables. II. BASIZ FUND SERVICE PRIVATE LIMITED 18. The Annual Report of this company is placed at pages 26 to 70 of the Paper Book. This company is engaged in providing NAV support services and consulting support services in the nature of fund accounting services to administrators. Insurance companies, prime brokers, private equity funds, hedge funds etc. The company has applied for copyrighting its financial statement proprietary processes. 19. A perusal of the Profit and Loss Account of this company shows that under the head Revenue from operations, this company has shown revenue from oper....
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....the TPO to exclude this company from the final set of comparables. III. GLOBAL PROCUREMENT CONSULTANTS LIMITED 22. This company is engaged in procurement consultancy services. The Annual Report of this company is placed at pages 71 to 120 of the Paper Book. The Annual Report of this company suggests that it has been established primarily to provide comprehensive management services required by the government departments or their project execution agencies to carry out procurement in a time bound energy-efficient manner within the framework of government regulations and guidelines of international institutions. The training and capacity building in the institutional aspects of procurement management forms an integral part of these activities, besides which, the consortium base of Global Procurement Consultants Ltd., ensures that all major sectors of the economy including Health, Education, Urban and Rural Development are covered. This company has gained diversified project experience and technical expertise in handling procurement and related program management activities for a large number of development programs funded by World Bank, DFID, UNICEF, African Development Bank an....
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....any is placed at pages 148 to 197 of the Paper Book. From its Annual Report, it can be seen that this company has shown its types of business as "Besides sale of paints, the company is also functioning as commission agents and providing technical services to its clients". No segmental reporting is found. Therefore, considering the business profile of this company with that of the appellant-company, we are of the considered view that this is not a good comparable and accordingly, direct the TPO to exclude this company from the final set of comparables. 5. TSR DARASHAW PRIVATE LIMITED 28. This company is an established Business Process Outsourcing (BPO) service provider, engaged in providing services in relation to records management activity, registry and share transfer, Payroll & Trust Fund activity. The Annual Report of this company is placed at pages 198 to 228 of the paper book. Surprisingly, this company was rejected by the TPO in Assessment Year 2008-09 in assessee's own case on account of being functionally different. The only reason for including this company is that the TPO is of the opinion that records management and pay roll service provided by this company are....