2019 (1) TMI 653 - HC - Income Tax

TPA - direction given by the Tribunal to exclude M/s Aptico Ltd., Cameo Crop Ltd., Global Procurement Consultants, Killik Agencies Marketing Ltd. and TSR Darashaw Ltd. from the list of comparables - Held that - Reasoning given by the Tribunal discloses the functional and other reasons to elucidate, dissimilarities between the five entities and the assessee. Keeping in view the aforesaid factual background, which is not doubted and debated nor challenged on the ground of perversity, we do not find any substantial question of law for consideration in this appeal.

Issues Involved:
1. Exclusion of Apitco Ltd. from the list of comparables.
2. Exclusion of Cameo Corporate Services from the list of comparables.
3. Exclusion of Global Procurement Consultants Ltd. from the list of comparables.
4. Exclusion of Killik Agencies and Marketing Ltd. from the list of comparables.
5. Exclusion of TSR Darashaw Ltd. from the list of comparables.

Analysis of Judgment:

1. Exclusion of Apitco Ltd. from the list of comparables:
The Tribunal excluded Apitco Ltd. from the list of comparables because it is a government enterprise providing high-end technical and consultancy services, unlike the respondent-assessee which is a private entity offering market support services. The Tribunal noted that Apitco Ltd. was rejected in several decisions, including Ciena India (P) Ltd vs. DCIT, Avaya India Private Limited vs. DCIT, and International SOS Services India Private Limited vs. DCIT, due to its status as a public sector undertaking and its operations being influenced by government policies. The Tribunal held that Apitco Ltd. is not comparable with the respondent-assessee and directed its exclusion from the list of comparables.

2. Exclusion of Cameo Corporate Services from the list of comparables:
The Tribunal found that Cameo Corporate Services' entire income was shown without segmental bifurcations, making it difficult to compare with the respondent-assessee. The Tribunal referenced the decision in Vestergaard Asia Private Limited vs. DCIT, where Cameo Corporate Services was excluded due to its functional dissimilarity with market support service providers. The Tribunal concluded that Cameo Corporate Services is not a good comparable to the respondent-assessee and directed its exclusion from the list of comparables.

3. Exclusion of Global Procurement Consultants Ltd. from the list of comparables:
The Tribunal observed that Global Procurement Consultants Ltd. is engaged in specialized procurement-related services for government and international projects, which are distinct from the market support services provided by the respondent-assessee. The Tribunal cited decisions in Travel Security Services (India) Private Ltd., Kobelco Cranes India Private Limited vs. ITO, and Adidas Technical Services Ltd. vs. DCIT, where Global Procurement Consultants Ltd. was excluded due to functional dissimilarity. The Tribunal directed the exclusion of Global Procurement Consultants Ltd. from the list of comparables.

4. Exclusion of Killik Agencies and Marketing Ltd. from the list of comparables:
The Tribunal noted that Killik Agencies and Marketing Ltd. acts as an agent for various foreign principals and offers after-sales services, which are not comparable to the market support services provided by the respondent-assessee. The Tribunal referenced the decision in Parametric Technology India Private Limited and DCIT vs. Aruba Networks India Private Limited, where Killik Agencies and Marketing Ltd. was excluded due to its functional dissimilarity. The Tribunal directed the exclusion of Killik Agencies and Marketing Ltd. from the list of comparables.

5. Exclusion of TSR Darashaw Ltd. from the list of comparables:
The Tribunal found that TSR Darashaw Ltd. is primarily involved in payroll processing, registrar and transfer agent activities, and records management, which are not comparable to the market support services provided by the respondent-assessee. The Tribunal cited decisions in Microsoft Corporation India Private Limited vs. DCIT, Eli Lilly and Co (India) Private Ltd vs. ACIT, and Adobe Systems India Private Limited vs. JCIT, where TSR Darashaw Ltd. was excluded due to its functional dissimilarity. The Tribunal directed the exclusion of TSR Darashaw Ltd. from the list of comparables.

Conclusion:
The Tribunal's decision to exclude Apitco Ltd., Cameo Corporate Services, Global Procurement Consultants Ltd., Killik Agencies and Marketing Ltd., and TSR Darashaw Ltd. from the list of comparables was based on detailed functional analysis and precedents. The High Court found no substantial question of law for consideration and dismissed the appeal, affirming the Tribunal's decision.

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