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TMI Blog2021 (9) TMI 1322X X X X Extracts X X X X X X X X Extracts X X X X ..... as regards the comparables. The comparables were dealing in open market and therefore, they were prone to the marketing and technical risks. They would invariably incur certain expenditure on marketing services and also to safeguard the technical inputs used by them. In such a case, the risk encountered by the assessee cannot be said to be the equivalent risks attached to the comparables. The risk attributed to the assessee by the TPO is an anticipated risk whereas the risk attributed by the assessee to the comparables is an existing risk. In such situation, we direct that the risk adjustment be accorded to the net margin of the comparables for bringing them on par with the assessee company. Administrative Support Services - whether in fact the services were rendered and availed by the assessee and if so, whether the mark-up of 5% can be considered as comparable with the market averages? - Culling from the details filed and arguments of both the parties, we find that there is no dispute about availing of the services. The evidences include the e-mails, invoices, agreements submitted - The assessee has also provided details of cost allocation - Hence, it cannot be said that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arable companies considered by the appellant in the Transfer Pricing Documentation not appreciating that these companies are functionally comparable to the appellant: S. No. Name of the company 1. I Indian Tourism Development Corporation Ltd. 2. Cyber Media Research Ltd. (Formerly IDC (India) Ltd.) 3. EDCIL (India) Ltd. (Segmental) 4. In house productions Ltd 3.3 That the AO/TPO erred on facts and in law in rejecting comparability adjustment on account of working capital employed by the appellant vis-a-vis comparable companies. 3.4 That the AO/TPO erred on facts and in law in not allowing appropriate risk adjustment to establish comparability on account of the appellant being a low- risk-bearing captive service provider as opposed to the comparable companies who were independent comparable companies. 3.5 That on the facts and in the circumstances of the case and in law, the AO/TPO erred in rejecting the contention of the appellant regarding risk adjustment, allegedly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amely ophthalmic support, marketing support and provision of Intra Group services. 6. With reference to the marketing research, the assessee appraises the AE of current market trends and developments in India by monitoring the industry, capital prices, political factors, supply and demand of the relevant Indian market in addition to identifying the potential customers in India. It is also involved in providing support and liason between the customers and Corning France (AE). Comparables: 7. With regard to the comparables selected by the AO in his TP study, the assessee objected to the inclusion of Just Dial Ltd. The TPO held that it is functionally comparable to the assessee, as the comparable also provides information to the users and connects the buyers to the sellers, the same way Just Dial operates. The ld. DRP confirmed the inclusion holding that since the comparable is effectively involved in marketing the information pertaining to different categories of SMEs across multiple platforms and is facilitating trade transactions. 8. Before us, it was argued by the ld. AR that Just Dial is having a website and the search service is available to users across multiple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion before us is as to whether the risk of having a single customer is equivalent to the marketing and technical risk attached to the comparables. According to the TPO, the assessee has the single customer risk' meaning, if the single customer refuses to have any dealings with the assessee, the assessee would lose all of its business and there would be no profit at all. But, as we see it, the risk of having a single customer is anticipated risk which may or may not happen. What we have to see is the position in the relevant period whether the appellant had encountered such a risk during the relevant period or not . 15. In the instant case, it can be seen that the assessee has not encountered the risk of having a single customer, whereas the same cannot be said as regards the comparables. The comparables were dealing in open market and therefore, they were prone to the marketing and technical risks. They would invariably incur certain expenditure on marketing services and also to safeguard the technical inputs used by them. In such a case, the risk encountered by the assessee cannot be said to be the equivalent risks attached to the comparables. The risk attributed to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices were actually received by the assessee b. No benefit was derived by the assessee by making payment for Administrative Support Services c. No evidence was furnished substantiating the receipt of administrative services d. The services were not actually needed by the assessee 20. The ld. AR argued that during the relevant financial year, the assessee paid administrative and support fees of ₹ 3,15,29,495/- to the associated enterprises which are remunerated at a cost plus 5 percent markup, wherein, cost includes all direct and indirect cost incurred in the provision of aforesaid services. This entails payment of all fixed costs, recognized on the basis of time spent by the service provider, and the same is allocated to the service recipient on the basis of the volume of usage, plus a mark-up of 5 percent. 21. For provision of administrative support services, the assessee entered into the following agreements with its associated enterprise namely Corning China (Shanghai) Regional Headquarter for the purpose of Accounting services and with Corning Inc., United States for the purpose of IT Support. 22. Cost allocation keys applied by respective associated ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act with local vendors themselves, the group s operations as a whole will not only become far more expensive but also inefficient since each group entity will be replicating the same work and multiple third party vendors shall be involved in processing the same transactions. Arguing thus, the ld. AR canvassed that the mark-up of 5% on the services is to be allowed. 26. The entire grounds consists of two issues, whether in fact the services were rendered and availed by the assesse and if so, whether the mark-up of 5% can be considered as comparable with the market averages. Culling from the details filed and arguments of both the parties, we find that there is no dispute about availing of the services. The evidences include the e-mails, invoices, agreements submitted at page nos. 294 to 397 of the paper book. The assessee has also provided details of cost allocation at page nos. 285 to 288 of the paper book. Hence, it cannot be said that the services have not been provided to the assessee. With regard to the mark-up of 5% paid by the assessee, we find that the economical analysis submitted by the assessee at page nos. 121 to 128 of the paper book is acceptable at the same time, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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