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TMI Blog2016 (6) TMI 1267X X X X Extracts X X X X X X X X Extracts X X X X ..... ant for the relevant AY at ₹ 1,95,95,410/- as against the returned income of ₹ 71,44,336/-. 2. That on the facts and circumstances of the case and in law, the Hon'ble Dispute Resolution Panel ( DRP ) / AO / Transfer Pricing Officer ( TPO ) erred in making a transfer pricing adjustment of ₹ 1,23,17,594/- in respect of the international transaction relating to marketing support service alleging the same to be not at arm's length in terms of the provisions of section 92C of the Act read with Rule 10D of the Income-tax Rules,1962 ( the Rules ). 3. That on the facts and circumstances of the case and in law, the DRP / AO / TPO while rejecting Appellant's determination of arm's length price for rendering marketing support services have erred in including inappropriate comparables from the Appellant's search matrix. 4. That on the facts and circumstances of the case and in law, the DRP / AO / TPO have erred, in arbitrarily rejecting certain functionally comparable companies identified by the Appellant, inter alia, using unreasonable comparability criterion. 5. That on the facts and circumstances of the case and in law, the AO ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee has selected transactional net margin method (TNMM) as the most appropriate method (MAM) for the purposes of calculating the arm s length price (ALP) of the international transaction and the operating margin has been calculated by using profit level indicator (PLI) as operating profit over operating costs (OP/OC). The assessee had calculated its average mean at 10.21%. For the benchmarking the assessee has selected itself as the tested party as the same is the least complex and reliable accurate data for comparison and is easily and readily available. It has also submitted in the TP study that the assessee does not own any valuable intangible property. 2.4 The functions performed by the assessee and the risk assumed by it are similar to those of sales and marketing companies as the assessee is mainly engaged in selling and marketing support activities. On the basis of the financial results, the assessee had selected the following comparables whose arithmetic mean was 11.94% as under: Sr. No. Company Name Data Base 3 Year Average (FY 2009- 2011) 1. Asian Business Exhibition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IDC (India) Ltd. 10.60% 2 Media Research Users Councils 40.53% 3 Info Edge India Ltd. 45.53% 4 Hindustan Unilever Field Services P. Ltd. 6.45% 5 Average 25.78 2.7 On receipt of the directions passed by the DRP, the Ld. AO passed the assessment order on 31/12/2015, making the impugned additions. 3. Aggrieved by the order of the Ld. AO the assessee is in appeal before us in respect of the adjustments made to ALP. 4. We have heard the rival contentions of both the sides, perused the orders passed by the authorities below, the paper books filed by the assessee and the case laws relied upon by both the sides. 4.1 At the outset, it is submitted by the Ld. AR that the assessee is not seriously disputing the TNMM as the MAM adopted by the transfer pricing officer. Thus the only dispute that arises is with respect to selection of the comparables. To be precise, the controversy rotates around the exclusion of the following comparab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustomers 6. engages in various promotional and marketing activities 5.3 Thus the company has characterised itself as being engaged in marketing and sales promotion activities with its AE and is a Support service provider that does not own any intangibles. With the above understanding of the nature of services provided by the assessee to its AE s, we will now proceed to examine the compatibility or otherwise of the companies disputed by the assessee to the extent. 6. Media Research Users Council : 6.1 The assessee objected the inclusion of this company proposed to be used in the final set of comparables by the TPO by contending that it was not functionally comparable. The ld.TPO included this company on the ground that this comparable company renders market research surveys to various members and it is a part and parcel of the market support services. On the other hand the Ld.AR contended that this comparable is functionally not similar due to abnormal profits and the financial being not same. The functions of this comparable has been placed at page 191 to 193 of the paper book. This company undertakes research work for the benefit of its members only. The Ld.AR has p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d have found that the main revenue has been generated from subscription fees received from the wide range of domains on Internet. Further it is observed that this company is in the process of building its own brand and has incurred huge advertising expenses to promote itself. Further it is observed from the TP study of this comparable that all the risks associated to the business is borne by the comparable, which is not the case with the assessee before us. The employee cost of the comparable company comes at 55.98% as compared to 32.93% in assessee s case. It is thus observed that this comparable owns valuable online portals through which it earned service fee from third-party customers making it functionally not comparable to the assessee. We are thus of the considered opinion that this company should be excluded from the list of comparables. 8. India Exposition Mart Ltd 8.1 The assessee has prayed for inclusion of this company as a comparable. It has been submitted that this company is engaged in the business of organizing trade fairs, conferences and exhibitions. It is also involved in providing event management services, advertising and interior decoration services. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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