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TMI Blog2018 (12) TMI 1853X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant any written show cause notice as required and mandated in terms of proviso to Section 92C(3) r.w.s. 92CA(3) of the Act. Ground No. 2: 2. The Ld. AO / Ld. TPO [following the directions of Dispute Resolution Panel - 1 {'DRP') under section 144C(5) of the Act] grossly erred, in law and in facts, in making an upward transfer pricing adjustment of Rs. 93,57,7107- in respect of Appellant's impugned international transaction of provision of business facilitation services to its associated enterprises ('AE') and in doing so, the Ld. AO/ TPO grossly erred in - 2.1. rejecting the following nine companies in the Appellant's comparable company set which are functionally comparable to Appellant's "Business Facilitation Services" segment: i. AOK In-House BPO Services Ltd. ii. Caliber Point Business Solutions Ltd. iii. Cyber Media Research Ltd. iv. ICRA Online Ltd. v. Jindal Intellicom Ltd. vi. M C S Ltd. vii. P L Worldways Ltd. viii. Pipal Research Analytics and Information Services India Private Ltd. ix. Sparsh BPO Services Ltd. 2.2. not considering the infrastructure cost re-imbursements received by the Appellant from its AEs as "opera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roducts-payment 13,094,976 CUP 2 Purchase of finished products of resale-payment 39,635,061 RPM 3 Business facilitation servicesreceipt 177,580,287 TNMM 4 Reimbursement of infrastructure cost receipt 15,171,875 TNMM 3. It was noticed by the TPO that the assessee had benchmarked the international transactions of provision of business facilitation services to its AEs using Transaction Net Margin Method (for short "TNMM"). The assessee company was selected as a tested party. The ALP was determined by the assessee using Prowess database and fourteen companies were selected as comparables. The arithmetic mean Operating Profit ("OP")/Operating Cost ("OC") margin of the comparable companies worked out at 10.56% vis-a-vis the OP/OC margin of the assessee‟s business facilitation service segment of 19.41%. The TPO rejected 13 comparables on the ground that their functional profiles were different from that of the assessee. One of the comparable viz M/s Genins India Insurance TPA Ltd. was however accepted by the TPO. The TPO further selected certain fresh comparables and came up with a final set up of comparables, as under:- S. No. Name of the comparable Company OP/OC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Consulting Service Ltd.; and (v). India Cement Capital Ltd. Further, the DRP after considering the comparables which were selected by the assessee but were rejected by the TPO, accepted four of such comparables as being functionally similar. On the basis of his aforesaid deliberations the DRP arrived at a final list of comparables as under:- Sr. No. Name Margin 1 Aditya Birla Insurance Brokers Ltd. 16.98% 2 Almondz Insurance Brokers Pvt. Ltd. 21.79% 3 Bajaj Capital Insurance Broking Ltd. 14.15% 4 India Infoline Insurance Brokers Ltd. 12.20% 5 Genins Inida TPA Ltd. 19.52% 6 Spectrum Business solutions Ltd. 10.25% Mean Margin 15.81% 7. Insofar the addition of Rs. 3,53,550/- that was proposed by the Assessing Officer in respect of difference in "closing stock‟ and "opening stock‟ shown by the assessee was concerned, it was the contention of the assessee before the DRP that the said difference had arisen due to software system while preparing the statement of stock in the format in which the same was required by the A.O. It was observed by the DRP that the assessee had furnished item-wise details of the "closing stock‟ with the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he aforementioned parties viz (i) Cyber Media Research Ltd.; and (ii) ICRA Online Ltd. had been accepted by the TPO as a comparable in the immediate last two preceding years i.e. A.Ys 2009-10 and 2010-11. The Ld. D.R in order to fortify his aforesaid contention took us through the order of the TPO for A.Y 2010-11 (Page 705) of the assessee‟s "Paper book‟ (for short "APB‟). The Ld. A.R drew our attention to the fact that both of the aforesaid parties were accepted by the TPO as comparable in the aforesaid years. Further, the Ld. A.R took us through the order of the TPO in the case of the assessee for A.Y 2009-10 (Page 692 of "APB‟). The Ld. A.R drew our attention to the fact that the aforementioned comparables i.e. (i) Cyber Media Research Ltd.; and (ii) ICRA Online Ltd. were accepted by the TPO as a comparable for benchmarking the international transactions of the assessee with its AEs. The Ld. A.R taking support from the aforesaid facts submitted, that now when the aforementioned comparables were accepted by the TPO for benchmarking the international transactions of the assessee with its AEs in the immediately preceding years, therefore, without pointing o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave perused the functional profile of the assessee and that of the aforementioned comparables viz (i) Cyber Media Research Ltd; and (ii) ICRA Online Ltd. Insofar Cyber Media Research Ltd. is concerned, it is the claim of the assessee that the company offers research-based insights and consulting services viz. market intelligence, market sizing, stakeholder satisfaction, growth opportunity identification, incubation advisory, and go-to-market services, which were similar to the services provided by the assessee to its AEs. It is the claim of the assessee that as the said company was functionally similar to the assessee, therefore, the same was rightly selected by the assessee as a comparable. It was averred by the ld. A.R that the TPO had wrongly rejected the said company i.e. Cyber Media Ltd. as a comparable on the ground that it was functionally different from the assessee. The ld. A.R taking us through the order of the TPO submitted, that he had observed that the said company being part of Cyber Media, South Asia‟s largest speciality media and media services group viz. Cyber Media Research (CMR) had been a front runner in market research, consulting and advisory services si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Assessment Year 2007- 08 on identical fact situation when expenditure on account of multimedia development and web casting was incurred by it, M/s. Pentamedia Graphics Ltd. was included by the TPO as a comparable to arrive at ALP of the transaction entered into by the Respondent with its AE. In the absence of Revenue being able to establish any difference in the facts from that existing in the earlier Assessment Year 2007-08 to that existing in the subject Assessment Year, there is no warrant to exclude the same. (b) Before us, the Revenue is not able to indicate any reason as to why in the absence of any change in the circumstances in the subject Assessment Year to that in the earlier Assessment Year the exclusion of Pentamedia Graphics Ltd. as comparable was justifiable. We find that the view taken by the Tribunal in the impugned order of including Pentamedia Graphics Ltd. as a comparable is a possible view." 13. Still further, we find that a similar view had also been taken by the Tribunal in the case of Thomas Cook (India) Ltd. vs DCIT1(3)(2), Mumbai, (2016) 70 taxmann.com 322(Mum). In the aforementioned case, it was observed that without assigning any valid reason of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a specified format which contained in detail the opening valuation, purchase price and closing value of each commodity that was used by the assessee company for manufacturing and trading purpose. On verification of details furnished by the assessee, it was observed by the A.O that there was a difference of Rs. 3,53,550/- between the "closing stock‟ and "opening stock‟ shown by the assessee. As the assessee failed to reconcile the aforesaid difference, therefore, the A.O in the draft assessment order proposed an addition of Rs. 3,53,550/- as an unexplained credit in the hands of the assessee. 16. The assessee assailed the aforesaid proposed addition of Rs. 3,53,550/- towards stock valuation before the DRP. The DRP, after deliberating upon the facts directed the A.O to delete the addition if the variation in the stock was reconciled by the assessee. The A.O giving effect to the directions of the DRP called upon the assessee to reconcile the difference of Rs. 3,53,550/- on account of valuation of inventories. However, as the assessee failed to reconcile the discrepancy/difference in the stock, therefore, the AO made an addition of Rs. 3,53,550/-. 17. We have deliberated ..... X X X X Extracts X X X X X X X X Extracts X X X X
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