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TMI Blog2017 (12) TMI 800X X X X Extracts X X X X X X X X Extracts X X X X ..... C of the Income-tax Act, 1961 (for short 'the Act') qua the assessment year 2011-12 on the grounds inter alia that :- "1 On facts, circumstances of the case and in law, the Learned Commissioner of Income-Tax (Appeals) - 19, New Delhi [herein referred to as "Ld. CIT(A)"] erred in confirming an addition of INR 15,503,946 to the taxable income of the Appellant on account of determination of arm's length price of the international transaction u/ s 92CA(3) of the Income-tax Act, 1961 ("the Act"). 2 On facts and in law, the Ld. CIT(A) erred in confirming the action of the Deputy Commissioner of Income-tax, Transfer Pricing Officer - 1(1)(2) ("Ld. TPO") of disregarding the economic analysis carried out by the Appellant u/ s 92D of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nternational transaction selected 6 comparables having average Net Cost Plus (NCP) at 8.22% as against NCP mark up of taxpayer at 9.99% and found its international transactions at arm's length. 5. However, TPO rejected 6 comparables chosen by the taxpayer and retained 2 and introduced 2 new comparables and calculated NCP mark up of 4 comparables at 26.34% as against NCP mark up of taxpayer at 9.99% and proposed the adjustment on account of arm's length price at Rs. 2,54,52,714/-. 6. The taxpayer has not approached the ld. DRP rather raised objections before the ld. CIT (A) who has ordered to exclude one comparable viz. Info Edge India Ltd. from the final list of comparables. Consequently, average NCP mark up of 3 comparables was recompute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of one comparables viz. Media Research Users Council (MRUC). Functional profile of the taxpayer is not in question. Method for benchmarking the international transaction has also been accepted by the ld. TPO. Now, we will examine the suitability of Media Research Users Council (MRUC) in the light of the contentions raised by the ld. AR for the taxpayer as well as ld. DR for the Revenue. 12. The ld. AR for the taxpayer challenged the inclusion of MRUC as a comparable for benchmarking the international transaction qua market support service segment on grounds of functional dissimilarity; that MRUC is a not-for-profit organisation; that MRUC outsources most of its activities to third party; that MRUC does not qualify the filter applied by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the considered view that the taxpayer cannot be compared with MRUC because of functional dissimilarity as no risk is assumed by the MRUC being a not-for-profit organisation and only serves the interest of its members and assets employed are only from the membership fee as well as subscription fee collected from its 249 members. 16. Furthermore, benefits / profits of the MRUC are not divided between the members, it being a not-for-profit organisation. So, the MRUC does not qualify the parameters lay down under Rule 10B (2) of the Rules, necessary for comparability analysis. Even otherwise, surplus of MRUC are neither distributed among the members nor are offered for income-tax purposes. 17. Furthermore under section 10B(1)(e) under Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 5 crores also. 20. Even otherwise, the major transactions of MRUC is Related Party Transactions as its substantive income is generated from membership fees and subscription fees for IRS/IOS reports and as such, price cannot be considered as independent controlled price as the major revenue is earned from its 249 members. Suitability of MRUC as a comparable has come up before the coordinate Bench of the Tribunal in Linked in Technology (supra) and has been ordered to be excluded for the reason discussed in the preceding paras. 21. In view of what has been discussed above, we are of the considered view that MRUC is not a suitable comparable vis-à-vis the taxpayer for benchmarking the international transactions qua market suppo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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