9911796707
TMI Blog2021 (2) TMI 357X X X X Extracts X X X X X X X X Extracts X X X X ..... ree years with the assessee company of supervising and managerial activities in their respective administrative fields whereas in cases of comparable cases selected by the TPO, we find that in these cases, the employees have rendered service ranging from seven months to five years which provide a wide variance and thus, for comparability purposes, it would be appropriate to consider comparable cases who have rendered services for minimum three years and exclude other cases who have rendered services for a lesser period. Case of Shri Prashant Varma who has rendered service of 4 years and that of Shri Yashwant Sharma who has rendered service of 5 years would be taken as comparable cases and rest all cases shall be excluded for the purposes of comparability analysis. The average salary of these two comparable cases comes to ₹ 618,500/- which shall be taken as ALP of salary paid to related persons as against current salary of ₹ 696,600/- resulting in transfer pricing adjustment of ₹ 546,700/- in hands of the assessee company. The AO/TPO is accordingly directed to restrict the TP adjustment to ₹ 546,700/- and the ground of appeal is thus partly allowed. - IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for the year under appeal was filed on 29.09.2015 declaring total income of ₹ 34,06,88,210/-, which was revised on 30.05.2016 at ₹ 34,51,67,610/-. Case was selected for limited scrutiny by issuing notice/s 143(2), which was later converted into Complete Scrutiny on the observation that assessee had entered into certain Specified Domestic Transactions. Accordingly, case of assessee was referred to Transfer Pricing Officer (TPO) u/s 92C for determination of Arm s length Price of such transactions. Ld. TPO, vide order dated 23.03.2018 passed u/s 92CA(3), proposed adjustment of ₹ 17,63,272/- for the captioned Assessment Year and Draft Assessment order dated 17.12.18 was passed by ld. AO in the case of assessee. Assessee objected to such Draft Assessment Order before Dispute Resolution Panel (DRP) in terms of section 144C, which was rejected and vide order dated 18.07.2019, ld.AO was directed to incorporate the variation proposed by ld. TPO in Final Assessment order. Accordingly, ld.AO passed the final assessment order on 14.08.2019, after making addition of ₹ 17,63,272/- being Transfer Pricing Adjustment and disallowance of ₹ 16,100/- of Travelling Expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 48,76,200/- 7. In order to determine Arm s length price, show cause notice was issued by TPO to assessee to furnish comparable cases to benchmark the salary paid by assesse to above related parties. It was submitted that the assessee has applied Comparable Uncontrolled Price (CUP) method for benchmarking Salary paid to these related parties. However, ld. TPO brushed aside submission made by assesse and re computed Arm s length price on the basis of salaries of other employees working in the organization. At this juncture, education qualification, work handled and job duration of such employees and AEs is tabulated as under: Name of Employee Education Qualification Salary Job description Duration of service till 01.04.2014 Gaurav Jain MBA ₹ 2,14,942/- -Handling marketing in distance learning programme, -Maintaining and monitoring fees records 7 months Neeraj Sharma MBA ₹ 2,54,916/- Same as above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Sociology) 6,96,600/- Counselling students; - for appearing in competitive exams - in stream selection - in stress management Counseling guardians to provide environment for better learning according to the interest of their wards and sharing performance evaluation -Ensuring motivated staff and uniformity in objectives 3 years Shubha Gupta BSc., Diploma in Computer Applications 6,96,600/- Supervising computer related matters 3 years 8. It is pertinent to note here that ld. TPO has termed such employees as comparables available within the organization by grossly ignoring the fact that such employees were:- - holding different education qualification than that of AEs / related parties: - having different job profiles, - employed with assessee company for shorter duration comparatively, 9. And last but not the least related parties being wives of directors had objectives beyond monetary rewards, which ensures higher productivity. Also, by virtue of experience and qualification, all the related parties are not only discharging ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between staff and managers and thus he was senior staff member, though these were loosely referred as manager. Whereas related parties were assigned the supervisory and / or managerial positions and were looking after wider canvas activities of the institute. 11. Further, so far as observation of DRP that details of duration/experience/ increase in salary of Prashant Varma furnished before DRP were not in consonance with TP Study Report (page 4 para 2.4.5 DRP order) it is submitted that details were not part of TP Study Report, rather were part of staff salary details furnished before DRP. Kind attention of your goodself is invited which shows staff salary details, it is apparent that all the details of salary paid to Shri Prashant Varma in different years are exactly same as mentioned in written submission filed before DRP. There was merely a mistake in percentage calculation of increase in salary over preceding years, which was a human error occurred while calculating the percentage in our case, and not at all any deliberate attempt to give incorrect data. It is therefore prayed that adverse inference drawn by DRP for this reason is contrary to the facts of the case. 12. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,96,600/- Total 48,76,200/- Name Post Educational Qualification Salary paid (in Rs.) Gaurav Jain Manager MBA 2,14,942/- Neeraj Sharma Manager MBA 2,54,916/- Nikhil Bajpai Manager B.E. Comp/PGDBM 4,04,363/- Prashant Varma Manager Post Graduate 7,08,000/- Satya Prakash Gupta Manager B. Sc. MBA 5,56,500/- Yashwant Sharma Manager BSc IT/MCA 5,29,500/- Total 26,68,221/- Average Salary Paid 4,44,704/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid to all the related persons (Directors s wives). The assessee has stated that the annual increase in salary given to unrelated person/employee is more than those of related persons. In this regard, it has relied upon the case of one of the employee Mr. Prashant Verma and submitted his salary data, which is reproduced as under:- Name 2011-12 2012-13 2013-14 2014-15 Per Month Per related person 30,000/- 37,000/- 47,000/- 57,000/- Percentage Increase Year to year 23% 27% 21% Name 2011-12 2012-13 2013-14 2014-15 Per Month salary Mr Prashant Verma 34,000/- 42,000/- 50,500/- 59,000/- Percentage Increase Year to year 24% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re with the proposed TP adjustment. The action of the AO/TPO is upheld. 15. We have heard the rival contentions and perused the material available on record. The limited issue under consideration relates to comparable cases selected by the TPO for the purposes of determining the arm s length price of the transactions entered into by the assessee company in terms of payment of remuneration to the related persons while applying the CUP method. We find that both the related persons as well as comparable cases selected by the TPO are holding non-teaching faculty role, and are holding and discharging administrative functions in terms of supervising and managerial role in their respective administrative fields. Therefore, besides the requisite educational qualification which each of them possesses, what is more relevant is the experience and period of service of such personnel discharging their respective functions which would provide a better and rationale basis for benchmarking analysis. In the instant case, we find that each of the related persons have rendered services of three years as on 1.04.2014 and thus carry the desired experience and skill set developed over such period o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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