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TMI Blog2016 (8) TMI 1365X X X X Extracts X X X X X X X X Extracts X X X X ..... n 144C(13) of the Income Tax Act, 1961 ('Act') in pursuance of the directions issued by Dispute Resolution Panel ('DRP'), Bangalore dated 19 December 2014 under section I 44C(5) of the Act ('the impugned order') inter-alia on the following grounds: In the facts and circumstances of the case and in law: General Grounds I. The impugned order and directions of the Hon'ble DRP are based on incorrect appreciation of facts and wrong interpretation of law and therefore, are bad in law. 2. The learned AO / Transfer Pricing Officer ('TPO') has erred in assessing the total income at Rs. 5,05,70,333 as against the returned income of Rs. 2,76,94,194 as computed by the Appellant in its return of income for A Y : 2010-11. 3. The learned AO has erred in law and in fact, in determining a sum of Rs. 1,26,88,059 as the balance tax demand payable by the Appellant. Transfer Pricing related grounds- General. 4. The learned DRP has erred in, law and facts, by upholding the stand of learned TPO and the learned AO of not accepting the economic analysis undertaken by the Appellant in accordance with the provisions of the Act read with the Rules, and conducting a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsider the information pertaining to segmental results and business description provided in the annual reports of the said companies. EDCIL (India) Ltd.- Erroneously rejected based on the contention that revenue from service was less than 75% of the total revenue, which is factually incorrect since the TPO failed to consider the information pertaining to segmental results available in the annual report of the said company. 10.The learned TPO and the learned AO have erred by wrongly computing the quantum of TP adjustments while giving effect to the directions of the DRP 11. The learned TPO/ AO erred in not providing the basis of arriving at the revised TP adjustment as per the impugned assessment order pursuant to the directions of the DRP, despite specific request by the Appellant in this regard. Other Grounds On the facts and in the circumstances of the case and in law: 12. The learned AO erred in levying interest of Rs. 49,12,458 and Rs. 4,132 under section 2348 and section 234C of the Act respectively; 13.The learned AO erred in initiating penalty proceedings under section 271(1)(c) of the Act, since the basic conditions required to initiate penalty proceedings were not s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and M/s Global Procurement Consultants Ltd., He submitted that if the appeal of the assessee on account of exclusion of these two comparables is allowed and the appeal of the revenue against exclusion of two comparables by the DRP is dismissed then there will be two remaining comparables i.e. M/s Cyber Media Research Ltd.14.85% and M/s Quadrant Communications Ltd., 13.11% the average around 14% as against the profit margin of the assessee company of 12.06% then no TP adjustment is required to be made. 5. Regarding exclusion of these two comparables for which the exclusion is being requested by the assessee, reliance was placed on the Tribunal order rendered in the case of M/s Adidas Technical Services Pvt.Ltd., Vs DCIT in ITA No.1233(Del.)/2015 dated 15-02-2016. He submitted a copy of the Tribunal order and drawn our attention to para- 8.3 of this Tribunal order as per which it was held by the Tribunal in that case that both these companies are functionally dissimilar and therefore, should be excluded from the list of final comparables. 6. Regarding functional profile, he submitted that in that case, it is noted by the Tribunal in para-2.2 of the Tribunal order that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... companies as good comparables having average profit of 27.74%. On page-3 of the TPO's order, the assessee's profit margin has been noted as 12.06%. Now as per arguments of the ld. AR of the assessee, two companies M/s Aptico Ltd., (Supra) and M/s Global Procurement Consultants Ltd., (Supra) should be excluded from the list of final comparables on the basis of functional dissimilarity in view of the Tribunal order rendered in the case of M/s Adidas Technical Services Pvt.Ltd., (Supra) . 11. The ld. DR of the revenue could not point out any difference in facts in the present case and in that case i.e. of M/s Adidas Technical Services Pvt.Ltd., (Supra). Para-8.3 of this Tribunal order is reproduced below. The Tribunal in that case held to exclude three companies i.e. M/s Aptico Ltd., M/s Global Procurement Consultants Ltd., and M/s TSR Darashaw Ltd., "8.3. We first take up the case of Apitco Ltd., (a) Apitco Ltd.:- Apitco Ltd. is a Public Sector Undertaking providing various support services for the development of tourism industry. Later the functional profile of the company had undergone a change, and it is now engaged in providing technical consultancy relating to asset ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. CIT, ITA No. 102/2015 judgment dated 10/08/2015 for the proposition that functionally dissimilar companies cannot be taken as comparables. He pointed out that decision of the Spl. Bench of the Tribunal in the case of Global India Pvt. Limited has been overruled by the Hon'ble Delhi High Court in ITA No. 7466/M/11 judgment dated 07/03/2004. 12.7 The ld. Departmental Representative on the other hand, pointed out that Global Procurement Limited is not a 100% Government of India owned company and that it is being promoted by export import bank of India, as a private sector company in partnership with Leading corporate groups like MECON, ICCI, TCE Consulting Engineers Ltd. etc. She submitted that the functional profile is that of specialized support services, which required high profile skill and timely delivery of quality services, which is comparable with the functional profile of the assessee. 12.8 On a careful consideration of these arguments, we are of the considered opinion that this company should be taken as a comparable for the following reasons: a) This is not a 100% Government owned company as claimed by the assessee. Under the head "corporate synergy" it is stated t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted for the reason that the functional profile is different from the assessee company as the company is engaged in providing asset management services as an auctioneer and valuer for construction equipment, earth moving machineries, commercial vehicles and other assets. It was further submitted that the annual report of the comparable is not available in the public domain for quantitative analysis. The Ld.D.R. submits that this company is functionally comparable as it is providing large gamut of services including allied business services to its clients. He further submitted that the company also qualifies the quantitative filters. On perusal of rival contentions, we find that the functional profile of the company Quippo Valuers and Auctioneers P.Ltd. is not similar to the functional profile of the assessee company. When a company is providing asset management services as an auctioneer and is also undertaking valuation of construction equipment, earth moving machineries etc. and when segmental data is not available, this company has to be, in our opinion, excluded from the list of comparables. (d) TSR Darashaw Ltd.:- The TPO included this company on the ground that the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay roll activity undertaken by this company with the marketing support services rendered by the assessee to its AEs, we find that both are way apart from each other. There can be no logical comparison between a specific pay roll services rendered by a company to its clients with the marketing support services rendered by the assessee to its AEs. This company is, therefore, directed to be excluded from the final set of comparables." Consistent with the view taken in the above case, we direct the AO/TPO to exclude this comparable. 12. Respectfully following this Tribunal order, and the absence of any difference in facts having been pointed out by the ld. DR of the revenue, we direct the AO/TPO to exclude these three companies i.e. M/s Aptico Ltd., M/s Global Procurement Consultants Ltd., and M/s TSR Darashaw Ltd. from the list of final comparables and since, the average profit of the remaining three comparable i.e. M/s Cyber Media Research Ltd.,14.85%, M/s HCCA Business Services Pvt. Ltd., 20.05% and M/s Quadrant Communications Ltd., 1.11% is around 16% which is within += 5% range of the assessee's profit margin of 12.06%, no TP adjustment is required to be made. We hold accordingl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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