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TMI Blog2018 (8) TMI 126X X X X Extracts X X X X X X X X Extracts X X X X ..... that in so far as management services are concerned, the assessee has not brought anything on record to suggest what type of services were given by the AEs for which the assessee had made the payments. In so far as technical services are concerned, the ld. DR fairly conceded that the details were furnished but not properly appreciated by the TPO. Considering the facts in totality, we are of the considered view that this issue also needs fresh adjudication. We, accordingly, restore this issue to the file of the TPO. The TPO is directed to decide the issue afresh after considering the detailed submissions/documentary evidences furnished by the assessee. The assessee is directed to furnish the details of services utilised by it for which it has made the payments to its AEs. The assessee is further directed to demonstrate what benefits it has received from its AEs. The TPO is directed to consider the same and decide the issue afresh after giving reasonable opportunity of being heard to the assessee. - ITA No. 6704/DEL/2015, SA No. 491/DEL/2017 And ITA No. 408/DEL/2017, SA No. 735/DEL/2017 And ITA No. 7328/DEL/2017 - - - Dated:- 31-7-2018 - SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,66,52,153 7. Reimbursement of expenses to AEs TNMM 2,23,42,780 8. Reimbursement of expenses by AEs No bench marking required 1,46,11,127 6. In its TP report, the assessee has computed the margins as under: Particulars Provision of sales and postsales support services Provision of .software development .Services Provision of Professional Services Provision of maintenance services Income Service Income 16,00,94,357 2,26,13,269 15,14,77,399 2,34,39,567 Operating Income 16,00,94,357 2,26,13,269 15,14,77,399 2,34,39,567 Expenditure Operating Expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t sick companies. This is not an appropriate filter. The correct filter is to reject companies having negative net worth. 4. Reject companies having insufficient descriptive information The filter is an appropriate filter. However the same has not been correctly applied as the function of comparables have not been correctly analysed in the TP report. 5. Reject companies having non comparable functions This filter has not been applied properly. 6. Reject companies having non comparable services This filter has not been applied properly. 7. Reject companies having Insufficient segmental information This is not an appropriate filter as the segmental information is available from the annual statements. 8. Reject companies that have significant related party transactions. The filter is an appropriate filter. However, the threshold to be applied is rejecting companies having RPT 25%. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... threshold of related party transactions, it can be stated that when the RP T exceeds 25% of sales, it can be said to be the stage when it will start affecting the price paid/received, he rationale given for the use of the limit of 25% is sound and the threshold has been upheld in recent judicial pronouncements. Therefore, there is no need to deviate from the limit of 25% (vi) Reject companies that are functionally different 10. Based on the above reasoning given for filters, the TPO proceeded by examining the comparables used by the assessee. The TPO at para 13 of his order observed that all four comparables used by the assessee are functionally different. After rejecting the comparables used by the assessee, the TPO proceeded by taking the following comparables for bench marking technical support services: No. Company Name OP/OC(%) 1 Kitco Limited 27.48 2 Ashok Leyland Project Services Ltd. 24.70 3 Bengal S R EI Infrastructure Devp. Ltd 42.14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of the assessee. 13. The assessee carried the matter before the DRP but without any success. 14. Before us, the ld. AR vehemently stated that the TPO did not give any justification in rejecting the comparables of the assessee. It is the say of the ld. AR that in the cases of comparables, Nu Tek India Limited and Teracom Limited, the TPO has simply mentioned that these are functionally different. The ld. AR continued by stating that in the cases of Himachal Futuristic Communications Ltd and Tele- communications Consultants India Limited, the TPO has contradicted himself in as much as he rejected these comparables by taking filters which he himself has considered for selection of comparables. 15. In its rebuttal, the ld. DR pointed out that there is nothing wrong in rejecting these comparables as the assessee does not have any turn key project as was in the case of Himachal Futuristic Communications Ltd. 16. In so far as comparables used by the TPO, the ld. AR pointed out that each comparable is functionally different to which the ld. DR pointed out that if the application of TNMM is expanded, then the comparables used by the TPO also deserve to be included if the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e payments. 20. In so far as technical services are concerned, the ld. DR fairly conceded that the details were furnished but not properly appreciated by the TPO. 21. Considering the facts in totality, we are of the considered view that this issue also needs fresh adjudication. We, accordingly, restore this issue to the file of the TPO. The TPO is directed to decide the issue afresh after considering the detailed submissions/documentary evidences furnished by the assessee. The assessee is directed to furnish the details of services utilised by it for which it has made the payments to its AEs. The assessee is further directed to demonstrate what benefits it has received from its AEs. The TPO is directed to consider the same and decide the issue afresh after giving reasonable opportunity of being heard to the assessee. 22. As mentioned elsewhere, the issue relating to provisions of management and support services is common in ITA Nos. 7328 408/DEL/2017. Both these appeals are disposed of accordingly. 23. In the result, all the three appeals of the assessee are allowed for statistical purposes. Stay Petitions Nos. 491/DEL/2017 735/DEL/2017 have become otiose. Order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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