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TMI Blog2018 (6) TMI 1226X X X X Extracts X X X X X X X X Extracts X X X X ..... a list of comparables for benchmarking the international transaction of Market Support Services rendered by the assessee to AEs., and to recompute the Arm’s Length Price of the international transaction of Market Support Services. Disallowance u/s 40 (i)(a) - assessee had incurred certain expenditure in foreign currency on various accounts - admission of additional evidence - Held that:-The very submission of the learned Counsel that the assessee had to file additional evidence to furnish the alleged Agreement, lends any amount of support to the observations of the Ld. AO that such an Agreement was not available during the assessment proceedings so that the Ld. AO could have returned a finding after appreciating the contentions of the assessee. Further the matter is pending before the Ld. AO for consideration of the very same issue in respect of the assessment year 2008-09, as was remanded by this Tribunal. In the circumstances, we deem it just and proper to remand this issue to the file of the Ld. AO for consideration - ITA No. 827/Del/2014 - - - Dated:- 21-6-2018 - SHRI RS SYAL, VICE PRESIDENT AND SHRI K.NARASIMHA CHARY, JUDICIAL MEMBER For The Assessee : Sh. Neeraj K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I) in the TNMM analysis. The PLI of the company is arrived at 10.06% on cost whereas the average PLI of the comparables is arrived at 6.06% as per the analysis in TP study report. Further the PLI of the comparable companies was worked out by adopting weighted average per the current year and the immediately preceding 2 years. 5. The assessee selected the following 10 comparables: number name of the company OP/OC for 1. Concept communication Ltd 2.88% 2. Cyber media research Ltd 10.93% 3. EDCIL (India) Ltd 0.47% 4. HINDUSTAN housing company limited 7.69% 5. Kestone integrated Mktd. Services private limited -4.86% 6. Quadrant communications Ltd 5.96% 7. Hansa vision private limited 4.49% 8. Empire indus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. Now we shall proceed to deal the question of comparable tea of these companies with assessee with reference to the submissions on either side and the material placed on record. Apitco Ltd., 9. Assessee objected the included of this company on the ground that this company provides high-end services, diversified activities which includes asset reconstruction and management services, projects related services, like a enterprises development, infrastructure planning and allotment, research studies and tourism, skilled allotment, and adornment management, and entrepreneur development and training, clustere allotment, energy-related services, emerging areas etc. Attention of the Ld. TPO was brought to the revenue breakup of various services with reference to the annual report of the company. 10. Ld. TPO, however, held that the revenue breakup of services given constitute much lower percentage of total services and most of the services rendered by Apitco Ltd., or in the nature of business services and predominantly Apitco Ltd., is a company providing various support services for allotment of tourism and industry, as such the objection of the assessee was not acceptable. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rivate Limited vs. ITO in ITA No. 802/del/2016. In international SOS services India private limited versus DCIT ITA No. 1631/del/2014 this company was excluded on account of being hundred percent government organisation and the appeal against this decision of the tribunal was dismissed by the Hon ble jurisdictional High Court.. Further it could be seen in Vestegaard Asia private limited verses DCIT in ITA No. 6670/del/2015 and H M Mouritz India private limited verses DCIT in ITA 282/bankg/2015 it is held that the Apitco Ltd., is not a good comparable with any company rendering business support services on the ground that this company is a public sector undertaking and its operations are mainly based the on the policy requirements of the government. 15. Further reliance is placed by the counsel on the decision of the Mumbai bench of this tribunal in TysokKrupp industries India private limited verses ACIT in ITA No. 6460/mum/2012 wherein it was held that this company being a government enterprises is not comparable with a private business service provider because in case of government enterprises profit motive is not irrelevant consideration, and government companies work for ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as rightly pointed out by the Ld. TPO the comparison has to be with a company which is providing services by dealing in the domestic market and not towards his clients in form of call centres and other outsourcing services catering to foreign customers. The beneficiary in both cases is a foreign client, but the difference is that in one case the services are being provided entirely in local market and in the case of ITES companies services are being provided by interacting with foreign clients are customers of foreign clients on day to day basis. ITES companies have the advantage of location savings why the business service companies do not have the advantage and since in this case services are being provided in India for the predominant business, Cameo corporate services is a correct comparable to the assessee. 20. We have gone through the financials of this company, including the profit and loss account incorporated page No. 96 and scheduled 8 incorporated at page number 102 of the paperbook relating to the financials of the comparable companies and find that the entire income of ₹ 24,36,67,920/-was shown without any segmental bifurcations. 21. Further the comparabili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r within the framework of government regulations and guidelines of international institutions. The website further states that the training and capacity building in the institutional aspects of procurement management forms an integral part of these activities, besides which, the consortium base of Global Procurement Consultants Ltd., ensures that all major sectors of the economy including Health, Education, Urban and Rural Development are covered. 24. Ld. TPO, however, opined that the Global Procurement Consultants Ltd., is into the activity of providing procurement management services to government departments and their project execution agencies, and inasmuch as the procurement services are in the nature of business services, Global Procurement Consultants Ltd., is a correct comparable. Ld. DRP in the impugned order stated that Global Procurement Consultants Ltd., is also in the similar line of business as that of the assessee and therefore it should be retained in the list of comparables. 25. Ld. AR submitted that this company is not a good comparable with the assessee who is only a marketing support service provider whereas Global Procurement Consultants Ltd., is giant go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es required by the government departments or their project execution agencies to carry out the procurement in a time bound and efficient manner within the framework of government regulations and guidelines of international institutions, which is not such a characteristic of the business of the assessee. The business model itself is different, let alone the disproportion is of the financials. We have no hesitation, in the face of the profile of Global Procurement Consultants Ltd., that it is not a good comparable at all to the assessee and for that matter to any private marketing support service provider, as such we direct the Ld. TPO to exclude this company from the list of comparables to benchmark the international transaction of the assessee in providing the market support services to its AEs. Killik Agencies and Marketing Ltd. 29. Killik Agencies and Marketing Ltd was opposed before the Ld. TPO by the assessee to be included in the final list of comparables on the ground that this company is providing business services and not comparable with the assessee. Having extracted the business profile of Killik Agencies and Marketing Ltd, Ld. TPO observed that this company ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... keting support service and it cannot find a place in the set of comparables for such companies. 34. On a perusal of the profile of this Killik Agencies and Marketing Ltd and also the findings of the tribunal on the comparability of this company with the companies rendering market support services, we are of the considered opinion that Killik Agencies and Marketing Ltd cannot be a good comparable to the assessee and is liable to be excluded from the final list of comparables and, accordingly we direct the Ld. TPO to exclude this company from the list of comparables for benchmarking the international transaction of market support services. TSR Darashaw Ltd. 35. This company was opposed by the assessee before the Ld. TPO on the ground of functionality similarity and the business model. It is argued before us that the TSR Darashaw Ltd. operates in three business segments, namely, Registrar and Transfer Agent activity, Record Management activity and Payroll And Trust Funding activity, which are quite dissimilar to the functions of the assessee. It is further submitted before us the TSR Darashaw Ltd. is a Business Process Outsourcing (BPO) organisation primarily engaged in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e find that TSR Darashaw Ltd. is mainly into the payroll process outsourcing with a new global payroll ERP application called RAMCO for its payroll business. Further the order of Ld. TPO itself reads that TSR Darashaw Ltd. undertakes the registrar and transfer agent activity functions for equity and preference shares, venture instruments and bonds, commercial paper and private placements. Moreover this company, under this segment also undertakes transfer processing customer/query handling and correspondence split/consolidation/renewal of certificates, processing and distribution of interest to slash dividend warrants, payments by physical warrants/through ECS/director credited. In the segment of Records Management activity, TSR Darashaw Ltd. undertakes storage, retention and tribal of physical and/or electronic records. In the segment of payroll and trust fund activity, TSR Darashaw Ltd. handles the activities normally handled by Payroll and Retirement Funds section in any organisation including interface with the regulatory authorities. These functions are not at all comparable with the functions performed by the assessee. At the same time no segmental information is available a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lleged professional services in Bangladesh. As per section 5 (2) read with section 9 (1) (vii) (c), such payments are made to non-resident for rendering managerial, consultancy or technical services to such nonresidents find their business in India are taxable in India. Such payments are covered under article XXIV of the treaty. Such payments can also be characterised as royalty for imparting of commercial or industrial knowledge and skill in the act as well as DTAA between India and Bangladesh. The assessee has not furnished the copy of Agreement between the assessee and the payee. xxx xxx xxx xxx xxx xxx in view of discussion in para 5.2 above, the payments are chargeable to tax in India and hence, tedious should have been done. In the event of non-compliance, the provisions of section 40 (i) (a) is attracted and disallowance of rupee ₹ 5,24,18,207/-is is being made. 45. It is brought to our ..... X X X X Extracts X X X X X X X X Extracts X X X X
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