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TMI Blog2020 (8) TMI 806X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, the appellant was engaged in providing technical support, back office support and market support services to its Associated Enterprises (AEs). The dispute here is the following international transactions the appellant had with its AEs : Sr. No. Description of the transactions Total value of transactions (Rs.) 1. Provision of technical services 87,335,044/- 2. Provision of back-office support services 76,455,489/- In technical support service segment, the arm's length price (ALP) for rendering services was determined to be at 16.96% as against 5.44% received by the appellant. The appellant suo motu computed the ALP at 16% under technical support services. Accordingly, it exercised its option as per proviso to section 92C(2) of the Act and voluntarily offered the difference for tax. The Transfer Pricing Officer (TPO) disagreed with the transfer pricing methodology adopted by the appellant and rejected some of the comparable companies selected by the appellant and added a few comparables selected by him. The final set of comparables selected by the TPO is as under : Sr. No. Comparables Selected by OP/TC 1. Choksi Laboratories Limited Assessee 23.19% 2. Dolphi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and loss account of the company reflects that the whole operating income of the company is from seismic survey and related service. It is also stated that the company's business consists of one reportable and geographical segment of seismic data acquisition and its related service within India. Thus it is stated that Alphageo segment should be rejected because it is functionally different from the appellant's business of provision of technical services. In respect of TCG Lifesciences ("TCG") the Ld. counsel argues that the same included by the TPO in the final set and upheld by the Ld. CIT(A) is functionally dissimilar and therefore, should be excluded from the comparable set. Reference is made to the Director's report, wherein it can be seen that the company is engaged in the business of contract research operation which is functionally different from the business of the appellant. In the "Notes to Accounts", it is stated that the company has earned its whole operating income from contract research operation and hence it can be concluded that the business of the appellant of provision of technical support service is functionally different to that of the company. Thus the Ld. coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the company have not changed, then there is no justification for excluding this company. Further, the Appellant has not submitted any justification on the acceptance of the third company viz. Transgene Biotech Limited as it is beneficial to the interest of the appellant. Since, the appellant in the given case has not given sufficient and appropriate evidence for the rejection of the 3 comparables selected by the TPO, I am in agreement with the contentions of the TPO that Transgene Biotech Limited, Alphageo (India) Ltd. & TCG Lifescience Ltd. are valid comparable which were also selected justified in the TP Order of my predecessor in the case of the appellant itself in AY 2008-09." Thus the Ld. DR explains that the AO has rightly included the comparable companies and correctly made an adjustment of Rs. 40,49,175/- on account of technical services. As regards the back office support services, the Ld. DR supports the order of the CIT(A) referring to similar decision for AY 2008-09. Thus it is stated by him that the order passed by the Ld. CIT(A) confirming the adjustment of Rs. 1,98,30,718/- made by the AO be affirmed. 6. We have heard the rival submissions and perused the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indicates that TCG has earned its whole operating income from contract research operations. Thus one can safely conclude that the business of the appellant is functionally different from TCG. Therefore, TCG is rejected as a comparable because it is functionally different from the appellant's business. Then we come to Pfizer. An examination of the accounts clearly indicates that Pfizer has prepared and reported financials with November end, whereas the appellant prepares and reports financial data for financial year end i.e. March. In CIT v PTC Software (I)(P) Ltd. (2016) 75 taxmann.com 31 (Bom.), the Hon'ble Bombay High Court has held that "data to be used for the comparability analysis should be of the same financial year in which the international transactions were entered into by the tested party". In view of the facts that the data considered are for different periods, which may result in different business conditions, we have no hesitation in rejecting Pfizer as a comparable to the appellant. In view of the above findings, we delete the adjustment of Rs. 40,49,175/- made by the AO. 7. In respect of provision of back-office support services, we find that similar issue aros ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons and perused material on record. We have also applied our mind to the decisions relied upon. It is evident, while disallowing the amount in dispute under section 40(a)(i) of the Act, the Assessing Officer has held that the payment made by the assessee to EMCAP towards Global support services is in the nature of fees for technical service as defined under Explanation-2 to section 9(1)(vii) of the Act. It is also relevant to note, under Article-12 of India Singapore tax treaty, fees for technical services, though, is taxable in the hands of the recipient in Singapore, however, it can also be taxed in India under certain circumstances. Applying the said provision, it is necessary to determine whether the payment made can at all be termed as fee for technical services as defined under Article-12 of India Singapore Tax Treaty. In our considered opinion, we have to address this issue at the very outset. Article-12(4) of India Singapore tax treaty defines fee for technical services as under:- "12.4 the term "fees for technical "services" as used in this Article means payments of any kind to any person in consideration of services of a managerial, technical or consultancy nature (incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of service, EMCAP has made available any technical knowledge experience, skill, knowhow, or process which enables the assessee to apply the technology contained therein on its own without the aid of EMCAP. The Hon'ble Karnataka High Court while explaining the true import of expression "make available" in case of De Beers India Mineral Pvt. Ltd. (supra) has observed as under:- "What is the meaning of "make available". The technical or consultancy service rendered should be of such a nature that it "makes available" to the recipient technical knowledge, know-how and the like. The service should he aimed at and result in transmitting technical knowledge, etc., so that the payer of the service could derive an enduring benefit and utilize the knowledge or know-how on his own in future without the aid of the service provider. In other words, to fit into the terminology "making available", the technical knowledge, skill, etc., must remain with the person receiving the services even after the particular contract comes to an end. It is not enough that the services offered are the product of intense technological effort and a lot of technical knowledge and experience of the service p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record that the payment of global support service fee was made under the agreement which has continued from the year 2003. It is a matter of record that in the preceding assessment years though the assessee has paid global support service fees to EMCAP without deducting tax at source, no disallowance under section 40(a)(i) was ever made. Therefore, there being no difference in facts in the impugned assessment year, considering that the payment was made under the same contract, even, applying the rule of consistency, no disallowance under section 40(a)(i) can be made in the impugned assessment year. Accordingly, we delete the disallowance made by the Assessing Officer. These grounds are allowed." 9.1 For AY 2008-09, the Tribunal has followed the above order while deciding similar addition made by the AO u/s 40(a)(i) of the Act Facts being identical, we follow the above order of the Co-ordinate Bench in appellant's own case for AY 2007-08 and AY 2008-09 and delete the addition of Rs. 1,85,29,377/- made by the AO u/s 40(a)(i) of the Act. 10. However, before we part with the matter, we must deal with one procedural issue as well. While hearing of these appeals was concluded on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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