TaxTMI 
TaxTMI 
2026 (9) TMI 47
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....n 25.11.2022. The case was selected for scrutiny under CASS was "On account of large value of international transactions in services compared to revenue from sale of services (ITES) and low profitability (TP risk parameter)". Notices u/s 142(1) of the Act on 15.09.2023, 20.09.2023, 08.12.2023 were issued. During the proceedings, it was found that the assessee company entered into two transactions as per details in Form No. 3CEB. The case was referred to the Transfer Pricing Officer as per Section 92CA(1) of the Act. For determination of Arm's Length Price in relation to the International transactions and required TP adjustment if any. Ld. TPO vide order dated 22.01.2025 u/s 92CA(3) of the Act passed and upward adjustment aggregating to Rs. 4,67,18,440/- on account of provision of sourcing support services. Draft assessment order dated 08.02.2025 u/s 144C(1) of the Act was passed. In response to communication, the assessee vide submissions dated 07.03.2025 submitted that the assessee has filed objections u/s 144C(2)(b) of the Act before the Hon'ble Dispute Resolution panel against Draft Assessment Order dated 08.02.2025. Hon'ble DRP passed order dated 05.08.2025. The order giving ef....
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....aw, the learned AO/ learned TPO/ Hon'ble DRP have grossly erred by accepting a comparable company namely Adbur Private Limited which operates on a commission-based model vis-à-vis taxpayer which is compensated on a cost plus basis. Thus, Adbur Private Limited is liable to be excluded in view of having a different business model and does not satisfy the FAR analysis test as mandated in Rule 10B of the Rules. 1.6. Ground of Appeal 6 On the facts, circumstances of the case and in law, the learned AO/ learned TPO/ Hon'ble DRP have grossly erred in selecting several other companies which are noncomparable to the impugned transaction ie., sourcing support services rendered by the Assessee viz., Artefacts Projects Limited, Infollion Research Services Private Limited, Method Apparel Consultancy India Private Limited, ERM India Private Limited and Mudra Online Technologies Private Limited or on account of failing quantitative filters viz., ERM India Private Limited and Mudra Online Technologies Private Limited. Thus, the said comparables are liable to be excluded and do not satisfy the FAR analysis test as mandated in Rule 10B of the Rules. 1.7. Gro....
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.... margins of comparable companies. In written submissions, it is mentioned as under: 6. Ld. Departmental Representative relied on impugned order. 7. From appraisal of record, it is apparent on record that as per DRP directions companies failing RPT filter were to be excluded from the list of final comparable. Ld. TPO failed to give effect to DRP directions and included Mudra online technologies Private Limited despite its failing in RPT filter. A rectification application was filed on 16.09.2025 which was rejected vide order dated 25.10.2025. Therefore, the action of ld. TPO in including Mudra Online Technologies Private Limited being illegal is set aside. Accordingly, ground of appeal No. 3 is partly allowed. 8. Ld. Authorized Representative for appellant/assessee submitted that ground of appeal No. 4 is regarding erroneous inclusion of 100% Government owned company as comparable. Ld. AO, Ld. TPO and Ld. DRP grossly erred in accepting namely comparable company i.e. EdCIL India Ltd. which is 100% government owned company and liable to be excluded. As it does not satisfy the functional, assets and risk (FAR analysis Test) under Rule 10D. In written submissions, it was submit....
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..... 140-141 of paper book. "7. We have gone through the Annual report of this company, whose copy is available on page 1 onwards of the Paper book. Profit & Loss Account of this company shows that it has mainly two streams of income, viz., Sales of Rs. 4.98 crore and Commission of Rs. 1.52 crore. It is the Commission segment which has been adopted by the TPO for inclusion in the list of comparables. As against this, the assessee company is providing marketing support services on a cost plus 5% mark-up basis. There is an apparent difference in the business model of earning Commission on sales and getting remunerated at cost plus basis. Whereas in the case of commission business, no income is earned unless the efforts made by incurring expenses fructify into orders, in the case of Cost plus basis, a company gets remunerated on all the costs incurred with a particular mark-up irrespective of any actual sales made. These two business models, namely, of commission and cost plus basis, cannot, by any standard, be brought on a same pedestal. This basic difference in the two business models results in varying profit margins and distorts comparability. In view of the fact that Priya ....
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....imited are set aside and the matter is restored to the file of Ld. TPO for a fresh decision in accordance with law after affording fair opportunity of hearing to the appellant/assessee. 21. Grounds of Appeal Nos. 7 to 13 are left open. 22. In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open court on 24.08.2026 ============= Document 1 . As per DRP directions, companies failing the RPT filter were to be excluded from the list of final comparable.(DRP directions enclosed in Page 11 to Page 39 of Paperbook Volume I) However, the TPO failed to give effect to the DRP directions and included Mudra in the final set despite it failing the RPT filter. Accordingly, a rectification application was filed on 16 September 2025 seeking exclusion of companies failing the RPT filter in line with the DRP directions . In the rectification order dated 25 October 2025, the AO rejected the Assessee's contention regarding Mudra's failure of the RPT filter and retained it in the final set of comparables. While the order does not provide the computation of RPT, it sets out the methodology, as per which RPT income plus ....
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....¤¡à¤¸à¤¿à¤² EdCIL EdCIL (India) Limited · Earning substantial revenue from government projects: As per the Annual Report, EDCIL is under the control of the Ministry of Education, Government of India, and a substantial part of its assets, contracts, and revenue relates to Government projects. (Kindly refer to pages 1401- 1410 and 1454-1457 of Paper Book, Volume III). · Judicial precedence on exclusion of EdCIL as a valid comparable on account of it being a government owned company - Delhi ITAT judgement in the case of SRF Limited v. ACIT (T APPEAL NOS. 1448 & 1449 (DELHI) OF 2022 AND 5618 (DELHI) OF 2024) held that the EDCIL (India) Ltd. being a Government undertaking should be excluded from the comparable list. (Refer pages 1-58 of the CLC) Delhi ITAT judgement in the case of SOS Services India Private Limited Vs. Principal Commissioner of Income Tax (67 taxmann.com 73) [upheld by Delhi High Court in its judgement dated 30 May 2017 (CIT Vs. International SOS Services India Private Limited (ITA 454/2016) and Supreme Court also upheld the Delhi Tribunal in the case of International SOS Services India P. Ltd (Civil Appeal No. 18255 of 2018)] excluded Ed....
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....ours tahad - Tada Cargasusaos, Maling butikuse unng-saint ske +Comum thượng kás & pit se cale . Fundamental differences in business model: It follows commission based revenue model, wherein such commission is contingent on successful transactions, and the income is directly linked to the volume and value of ad-space sold. Further, the risk profile of a commission-based model is significantly higher as there is uncertainty in securing the orders as compared to the cost-plus model wherein the business is primarily assured by the AEs. Relevant extracts of annual reports for FY 2021-22 demonstrating the business model are as follows: Page 1602 of Paperbook Volume III (200 See- Sector cation doente-es 4 - Page 1604 and 1481 of Paperbook Volume III Footnotes (A) Stevemie frous Media Advisory : 131:53 (B) Revenme from Media Advisory : 139.13 OPERATIES Thể Cunquoy à in the Bostonve el persone av vilu of advertising space se tery co commonen ii for santa the TV Bauhn frim. bravant - · Judicial precedents on comparability vis-à -vis entities operating under different business models: · Delhi ITAT judgement in the case of....