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TMI Blog2018 (7) TMI 1727X X X X Extracts X X X X X X X X Extracts X X X X ..... ndian company and is part of the Six Continents Hotels group. The appellant-company was incorporated as H.I. Crowe Plaza [India] Pvt. Ltd as a subsidiary of BASS International Holdings N.V. Netherlands, now known as Six Continents International Holdings, Holdings BV. The assessee provides ancillary management services to Six Continents Hotels, Inc. It also renders service to Indian franchises of its foreign affiliates. Following International transactions were entered into during the year under consideration: Sl. No Types of International Transaction Method Selected Total Value of 1 Provision of ancillary management and operational assistance services TNMM 156,241,883 2 Reimbursement of expenses by AE's No Benchmarki na & Required 335,566 3 Reimbursement of expenses to AE's 7,800,462 5. The assessee has used TNMM as the method and OP/TC as the PLI. The assessee has arrived at a set of three companies with an average margin of 9.62% by using multiple year data. The assessee's own margin is worked out to be 11.15%, and based on this, the assessee has concluded that its international transactions are at arm's length. 6. After considering the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions Ltd which is engaged in online payment processing business and software development & maintenance cannot be selected as a comparable in the present case as the appellant is engaged in the providing ancillary management support services. Accordingly, Techprocess Solutions Ltd. is excluded from the list of comparables selected by the TPO." 11. However, the ld. CIT(A) rejected the claim of the assessee to exclude Choksi Laboratories Ltd and Vapi Waste & Effluent Mgmt. Co. from the set of comparables. The relevant findings of the ld. CIT(A) are as under: "'I have carefully considered the above submission of the appellant, Vapi Waste & Effluent Mgmt. Co. Ltd is mainly engaged in the providing waste management services and operates effluent treatment plant. The appellant company renders ancillary support services to SCH1. Considering the facts of the case, I am of the view that the functions of Vapi Waste & Effluent Mgmt. Co. Ltd. are broadly similar to the functions carried out by the appellant company. Accordingly, Vapi Waste & Effluent Mgmt. Co. Ltd is retained in the final set of comparable companies. I have carefully considered the above submission of the appellant. Cho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A). This ground of the revenue is dismissed. 15. Coming to the inclusion of two comparables, we find that Vapi Waste Effluent Co. is a non-profit making entity engaged in treatment of polluted water, industrial effluents and deposition and treatment of solid wastage of the member units whereas the services provided by the assessee company are purely in the nature of marketing support services. 16. We further find that in the case of Vapi Waste Efflunet Co., capital is contributed by its members and Government. Major portion of its income comes from members in form of charges for deposition which means that the contributors are beneficiaries. Therefore, the price of this company cannot be treated as an independent and uncontrolled price when the majority of the Revenue is earned from the members who have contributed to the capital of the company. 17. We further find that almost 64% of the assets employed by this company are plant and machinery and for a service company to have such heavy capitalisation in plant and machinery is unique whereas assets of the assessee company are of routine nature, namely computer and office equipment. 18. The coordinate bench in the case of Actis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idered opinion, the profile of the assessee company cannot be compared with the profile of a laboratory. 22. We further find that Choksi Laboratory have incurred significant expenditure on purchase of inventory i.e. glass ware and chemicals and laboratory consumables used for testing purposes. As per annual report of Choksi Laboratory Ltd 36.80% is incurred by this company. Even this company cannot be compared with the assessee company on the basis of assets employed which can be understood from the following chart: Particulars Choksi IHG India Instruments (A) 86,913,623 - Other Fixed Assets 45,749,622 19,691,329 Total Fixed Assets (A) + (B) 132,663,245 19,691,329 Revenue 95,618,162 25,666,285 Total Fixed Asset/ Revenue ratio 138.742% 7.64% Instruments/ Revenue Ratio 90.89% Instruments/ Total Assets 65% 23. Considering the facts in totality, we have no hesitation in holding that Choksi Laboratories Ltd is not a good comparable and should be excluded from the final list of comparables. We, accordingly set aside the finding of the ld. CIT(A) and direct the TPO/Assessing Officer for exclusion of two companies, namely ..... X X X X Extracts X X X X X X X X Extracts X X X X
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