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2019 (10) TMI 1580 - AT - Income TaxTP Adjustment - comparable selection - HELD THAT - As assessee in the instant case is engaged in the business of providing marketing supervising and support services for the mining/meteorological/metals minerals processing industry. The segment of market support services has been benchmarked by the assessee using TNMM as the most appropriate method and OP/TC as the PLI thus Aptico Ltd.; Info Edge (India) Ltd.; MMTV Ltd.; TSR Darashaw Ltd. and Global Procurement Consultants Ltd. cannot be considered as comparables with that of the assessee company as functinally dissmilar, . Accordingly the TPO is directed to exclude these comparables. TDS u/s 195 - Non-deduction of tax from the payment made to Outotec Oyj - whether amounts received by the assessee from Outotec India Pvt. Ltd. does not qualify as FTS as per DTAA? - HELD THAT - We find merit in the argument of assessee that when the payee is not liable to tax on the payments received from the assessee company the question of deduction of tax does not arise. The assessee also made a statement at the bar that the Revenue has accepted the decision of the Tribunal and has not filed any appeal before the Hon ble High Court. We therefore dismiss the ground raised by the Revenue challenging the deletion made by the Assessing Officer for non-deduction of tax from the payments made to Outotec Oyj. The ground raised by the Revenue is accordingly dismissed.
Issues Involved:
1. Adjustment to international transactions pertaining to rendering of marketing support services (MSS). 2. Inclusion and exclusion of certain comparables in determining the arm's length price. 3. Disallowance under section 40(a)(i) for non-deduction of tax on payment to Outotec Oyj. Issue-wise Detailed Analysis: 1. Adjustment to International Transactions Pertaining to Rendering of Marketing Support Services (MSS): The Tribunal addressed the adjustment of Rs. 50,26,689/- made by the TPO to the international transactions related to MSS. The TPO had added nine comparables to the four selected by the assessee, resulting in an average OP/TC of 19.29%, leading to an upward adjustment. The Tribunal noted that the assessee used TNMM as the most appropriate method and considered four comparables with an average margin of 11.20%. The Tribunal found that the TPO's fresh search and addition of nine comparables were not justified. 2. Inclusion and Exclusion of Certain Comparables in Determining the Arm's Length Price: The Tribunal examined the inclusion of four comparables challenged by the assessee: Aptico Ltd., Info Edge (India) Ltd., MMTV Ltd., and TSR Darashaw Ltd. The Tribunal referred to various decisions where these comparables were held to be not comparable due to functional dissimilarities. For instance, MMTV Ltd. was excluded as it was engaged in television broadcasting with significant intangibles, making it functionally different from the assessee. Similarly, Aptico Ltd. provided technical consultancy services, which were not comparable to MSS. Info Edge (India) Ltd. and TSR Darashaw Ltd. were also excluded based on their distinct functional profiles. The Tribunal directed the TPO to exclude these comparables from the list. 3. Disallowance under Section 40(a)(i) for Non-Deduction of Tax on Payment to Outotec Oyj: The Tribunal addressed the addition of Rs. 1,62,88,677/- made by the Assessing Officer for non-deduction of tax on payments made to Outotec Oyj. The assessee argued that the payments were not taxable under the India-Finland DTAA as they did not qualify as fees for technical services (FTS). The DRP had deleted the addition, noting that the services were managerial in nature and did not "make available" any technology or know-how. The Tribunal upheld the DRP's decision, referencing the Kolkata Bench's ruling in Outotec Oyj vs. DCIT, which held that the amounts received did not qualify as FTS under the DTAA. The Tribunal concluded that when the payee is not liable to tax, the question of deduction of tax does not arise, and dismissed the Revenue's appeal on this ground. Conclusion: The Tribunal allowed the appeal filed by the assessee, directing the exclusion of certain comparables and upheld the deletion of the disallowance under section 40(a)(i). The appeal filed by the Revenue was dismissed. The decision was pronounced in the open court on 23.10.2019.
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