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TMI Blog2023 (3) TMI 1185X X X X Extracts X X X X X X X X Extracts X X X X ..... te that it is not the case of the Appellant that First Comparable is functionally dissimilar to the Appellant. We do not find any merit in the contentions raised on behalf of Appellant for exclusion of the First Comparable (i.e. Asia Business Exhibition Conferences Ltd.). Accordingly, Ground No. 1.2(b) raised by the Appellant is rejected. Exclusion of Second Comparable [Messe Duesseldorf India Pvt. Ltd.] - There is nothing placed on record by the Appellant to controvert the concurrent factual findings returned by the TPO and the DRP to the effect that proper information/material about Second Comparable was available. Therefore, we do not find any reason to interfere with the exclusion of Second Comparable from the list of comparables. Computing ALP of the international transaction the TPO had applied PLI at entity level and not with reference to international transaction - In view of the above judgment of the Hon ble Bombay High Court in the case of Ratilal Becharlal Sons [ 2015 (11) TMI 1524 - BOMBAY HIGH COURT] and the observations of DRP, we direct the Assessing Officer to compute transfer pricing adjustment in respect of international transactions with AE. Accordingly, Ground N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ternational transactions with the AEs. In other words, the TPO applied the PLI margin to aggregate of transactions with AEs as well as Non-AEs as against PLI applied only to transactions with AEs, in computing the ALP. On the basis of the facts and in the circumstances of the case and in law, the adjustment made by TPO and upheld by the Hon'ble DRP, ought to be deleted." 3. The Appellant is a company engaged in the business of organizing, arranging, promoting, marketing, providing assistance for trade fairs, exhibitions, conference, events, conventions, seminars, and delegations of all kind in India and abroad. The Appellant filed its return of income for the Assessment Year 2012-13 on 29.11.2012 declaring total loss of INR (-) 3,17,55,204/-. 4. The case of the Appellant was selected for scrutiny. During the assessment proceedings, the Assessing Officer noted that the Appellant has entered into international transactions with its Associated Enterprises (AEs) and therefore, a reference was made under Section 92CA(1) to the Transfer Pricing Officer (TPO) for the determination of Arm‟s Length Price (ALP) of the international transactions. 5. The TPO, vide order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sheet entry, dated 07.01.2016, asked the Appellant show cause why the ten companies should be selected as comparable for computing ALP under TNMM. The Appellant vide letter, dated 21.10.2016, replied to the aforesaid show cause notice. The TPO, after taking into consideration the response from the Appellant, selected the following three comparables: Asian Business Exhibition & Conference Ltd., HCCA Business Services Ltd. and Fun Film & Music Entertainment Ltd. By taking arithmetic mean of NCP margins of the above comparables for the Financial Year 2011-12, the TPO arrived at a margin of 15.53%. Adding the same to the total operating cost, the TPO arrived at total arm‟s length Revenue of INR 13,22,16,180/- and after reducing the operating revenue as determined by the Assessee, arrived at transfer pricing adjustment of INR 5,74,45,969/. 9. The above transfer pricing adjustment was incorporated in the Draft Assessment Order, dated 18.03.2016, against which objections were filed before DRP. The DRP vide, order dated 08.12.2016, rejected all the objections raised by the Appellant except the objections to inclusion of HCCA Business Services Ltd. as a comparable. The DRP directed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We have heard the rival contention and perused the material on record including the judicial precedents cited during the course of hearing. We concur with DRP to hold that comparable transactions with AEs cannot be adopted for benchmarking international transaction using CUP Method as the same do not qualify as uncontrolled transactions. Thus, we find no infirmity in rejecting CUP Method and adoption of TNMM as the most appropriate method for benchmarking international transaction in the facts of the present case. To this extent Ground 1.1 raised in the Appeal is treated as partly allowed. Ground 1.2(b) 13. As regard First Comparable, the contention of the Appellant is that it should have been rejected on account of high turnover. However, we note that neither TPO nor the Appellant had applied any turnover filter. Further, as rightly observed by the DRP, in absence of any impact of high turnover on the profitability having been pointed out in proceedings before the TPO/DRP, First Comparable could not have been excluded merely on account of high turnover. During the course of hearing, the Appellant had placed reliance in the judgment of Hon‟ble Karnataka High Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8223;ble Karnataka High Court does not apply to the facts of the present case. We also note that it is not the case of the Appellant that First Comparable is functionally dissimilar to the Appellant. We do not find any merit in the contentions raised on behalf of Appellant for exclusion of the First Comparable (i.e. Asia Business Exhibition & Conferences Ltd.). Accordingly, Ground No. 1.2(b) raised by the Appellant is rejected. Ground 1.2(a) 15. As regards Second Comparable, the TPO had rejected the same holding as under: "However in case of Messe Duesseldorf India Pvt. Ltd. Financials are incomplete- there is no detailed P/L account, Balance Sheet, Annual Report etc thus on account of lack of information/data this company is rejected as a comparable." 16. The objections raised by the Appellant on exclusion of Second Comparable were rejected by the DRP holding as under: "This comparable has been rejected by the TPO on the grounds that complete financials of this comparable are not available. The assessee has argued that summary of results available on ROC website should be accepted. We have considered the submission of the assessee. It is seen from the Director's report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, the DRP had noted that this issue was decided in favour of the Appellant by the judgment of the Hon‟ble Bombay High Court. However, the DRP confirmed the addition made by the Assessing Officer to keep the issue alive and to protect the interest of Revenue. 19. During the course of hearing the Ld. Authorised Representative for the Appellant has also relied upon the judgment of the Hon‟ble Bombay High Court in the case of Commissioner of Income Tax-16, Mumbai vs. Ratilal Becharlal & Sons : 288 CTR 31 (Bombay) wherein it has been held as under: "2. The Revenue urges the following questions of law for our consideration: (i) Whether on the facts and in the circumstances of the case and in law, the Tribunal was right in holding that the adjustment arising out of the Arm's Length Price (ALP) is to be restricted to only International Transactions with the Associated Enterprise instead of entire turnover of the assessee ? xx xx 3. Re. :- Question No.(i) (a) During the subject assessment year, the Respondent Assessee had both domestic and international transactions including transactions with Associated Enterprises over and above transaction with indepen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue is to be accepted, it would result in taxing non-existing income/profits of transactions entered into between the Respondent Assessee and independent third parties. This in the present fact, even in the absence of an allegation that the transactions with parties other than Associated Enterprise is not at ALP. The transactions with parties other than the International Transactions with Associated Enterprise or in respect of specified domestic transactions are not within the ambit of Chapter X of the Act. In fact, a similar question arose for our consideration in Tara Jewels Exports Pvt. Ltd. (supra) and an identical contention was negatived. So also the Delhi High Court in Keihin Panalfa Ltd. (supra) has negatived a similar contention. (e) In the facts and circumstances of the present case, the question as proposed would be contrary to the plain meaning and interpretation of Chapter X of the Act. Therefore, question of law as proposed, does not give rise to any substantial question of law. Thus, not entertained." (Emphasis Supplied) 20. In view of the above judgment of the Hon‟ble Bombay High Court in the case of Ratilal Becharlal & Sons: 288 CTR 31 (Bombay) and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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