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TMI Blog2023 (5) TMI 268X X X X Extracts X X X X X X X X Extracts X X X X ..... ry and secondary research and also providing end to end support for their clients. Hence, we hold that the comparable has been rightly selected. Majestic Research Service Solutions Ltd - As seen that there was no mergers/acquisitions in the instant year as contended by the assessee. In fact there was only divestment of shareholdings which has no impact in the instant year's P L account. And, the assessee company's contentions appear to be irrelevant and baseless as far as selection of the company as comparable is concerned. On the issue of rejection by the TPO in the subsequent year we hold that the facts have been examined on year to year basis. During the instant year we find that the comparable is not beyond any filters applied and matches the FAR analysis. We need to look into and examine whether the comparable in question can be considered as right comparable which can be included TP Study for the year before us based on the functions, assets and risks. It is unnecessary to comment without examining the FAR of the subsequent year as to whether this comparable can be included in the current year or not. As the facts pertaining to the instant year are concern w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion for gratuity' , disallowed in the intimation u/s 143(1) have already been disallowed by the Appellant in its computation of income. 4. That on the facts and circumstances of the case and in law, the orders passed by the Ld. AO / TPO/ DRP in respect of transfer pricing adjustment are not in accordance with law and contrary to the facts and circumstances of the present case, are bad in law and liable to be annul led. 5. That on the facts and circumstances of the case and in law, the Learned AO/ TPO / DRP have erred by not satisfying any of the conditions prescribed under section 92C(3) of the Act and making an impugned transfer pricing adjustment without appreciating and understanding the intricacies and criticalities of the case and the business model of the Appellant. 6. The Learned AO/TPO/DRP have erred in making an adjustment of INR 62,79,702 in relation to provision of marketing support services by the Appellant to its Associated enterprises ( AEs ). Whi le making the adjustment, on the facts and circumstances of the case and in law, the Learned AO/TPO/DRP have erred in: 6.1 Not appreciating the business model, functional, asset risk analysis u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax demand in the final assessment order amounting to INR 1,04,28,560 by considering inaccurate particulars of assessed income (at INR 3,23,91,048) as compared to the assessed income computed by the Ld. AO himself in the final assessment order (at INR 2,96,87,700). The said erroneous computation is a mistake apparent from record. 10. That on the facts and circumstances of the case and in law, the Ld. AO has erred in not granting credit of tax deducted at source amounting to INR 91,874. 11. That on the facts and circumstances of the case and in law, the Ld. AO has erred in not granting available credit of excess minimum alternate tax amounting to INR 1,63,858. 12. That on the facts and circumstances of the case and in law, the Ld. AO has erred in levying consequential interest under Sections 234B and 234C of the Act. 3. The facts of the case are as under:- The Appellant is primarily engaged in the business of trading of data cables, connectors, industrial connectivity products, network equipment s and related services comprises of consultancy, design, training and technical support. During the AY 2017-18, the Appellant was engaged in provision of market s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alytics Pvt, Ltd. Axis My India Ltd. Majestic Research Services and Solutions ltd. 1. SG Analytics Pvt, Ltd:- 7. The ld AR argued that SG Analytics is engaged in the provision of research and analytics services which includes Environmental, Social Governance ( ESG ) consulting, investment research, market research, data management and analytics and Robotic Process Automation ( RPA ). It covers the following: a) Investment Research - The company claims to be one of the top investment research firms. It produces high-quality, in- depth, and tailored investment and financial research services to help clients successfully navigate financial markets, enhance their portfolios, and make strategic decisions. b) Data management Analytics - It offers marketing analytics, customer analytics, research analytics, sales analytics, and other data analytics services under one umbrella. c) RPA Services - Robotic process automation (or RPA) is a form of business process automation technology based on metaphorical software robots (bots) or on artificial intelligence (Al)/digital workers. It provides end-to-end RPA solutions to its global clients. d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is responsible for identification of customers, interaction with customers, maintaining long term relationship with customers, forwarding the feedback of the customers, ensuring supply of material to the customer, then col lection of payments from the customer etc., which in other words means that all the activities related to sale of products of AEs along with the entire customer interface/interaction is taken care of by the assessee company. It was argued that as mentioned in the TPSR, the assessee company is doing complete marketing which included entire market research for the AEs. The marketing and the market research functions as mentioned by the assessee in TPSR are detailed below:- (a) Assessee company provides market information to AE (b) The assessee company is responsible for studying and analyzing Indian market for demand and supply situation and also for the products specification. (c) The assesee company does competitor profiling for the AEs, (d) The assessee company informs the AE about government outlook/policies etc, (e) The assessee company provides reports on business development in India, all the interactions with the customers is ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ket research and in TNMM only broad similarity of functions is required. Like assessee company, M/s SG Analytics also gets its revenue primarily from the services income, as mentioned in its financial and it passes all the filters applied by assessee/TPO. 15. With regard to the extraordinary events such as the comparable was involved in a finance fraud in F.Y 2015-16 which has been evidenced by the Company's investigating team and the statutory auditors, it was submitted that the so called fraud was committed in F.Y. 2015-16 and it is related to wrong cash withdrawal by employee. It is not known how this fraud is affecting the financials of F.Y. 2016-17. In fact if a fraud has taken place then it should reduce the profit margins and the assessee should not have any grievance because of that fraud. 16. Against the submissions of the ld DR the counsel for the assessee has submitted his rebuttal in writing. It further elaborated that the investment research, data management analytics, RPA services, ESG consulting, market research conducted by the comparable company are different from the assessee company. It was also submitted that the company has not reported any segmentals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between controlled and uncontrolled transactions/entity. It would not be apposite to ignore functional dissimilarity only the reason that its impact may be reduced on account of using arithmetical mean the PLI. The DRP had noted that eClerx was functionally dissimilar, but ignored same relying on an assumption that the functional dissimilarity would be subsumed in the profit margin. As noted, the content of services provided by the Assessee and the entities in question were not similar. In addition, there were also functional dissimilarities between the Assessee and the two entities in question. In our view, these comparability factors could not be ignored by the Tribunal. While using TNMM, the search for comparables may be broadened by including comparables offering services/products which are not entirely similar to the controlled transaction/entity. However, this can be done only if (a) the functions performed by the tested party and the selected comparable entity are similar including the assets used and the risks assumed; and (b) the difference in services/products offered has no material bearing on the profitability. 19. In this background we find that the assessee co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company has shown an extraordinary and inorganic growth of 94.31% in FY 2016- 17. 21. Rebutting the arguments of the ld AR, the departmental representative Shri Rajesh Kumar vehemently argued that from the perusal of the documents it is seen that the comparable is mainly involved in market research, advertising research, brand research, consumer research and other research services to assist companies in developing successful products/brands. Thus predominantly it is doing the market research and the consumer research and both these functions are also done by the assessee company in relation to its parent company. As mentioned in the functional profile of the assessee company, it is absolutely clear that the assessee company does complete customer interface right from the identification of the customer and his requirements to delivery of products/ payments to the AE. Also, the assessee company is involved in doing complete market research for its AE, the same functions performed by the Majestic Research Service Solutions Ltd. It was argued that Majestic Research Service Solutions Ltd. is claimed to be doing whole lot of other high and functions but from the financials reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been rejected by the Ld. TPO herself in Assessee's own case for A.Y 2018-19, the ld DR argued that this concern of the assessee has been duly rejected by the DRP by speaking order however the following facts are mentioned for consideration of the bench. The ld AR Shri Vishal Kalra submitted his rebuttal in writing which has been duly examined. 26. Heard the arguments of both the parties and perused the material available on record. 27. On the issue of functions performed by both the entities, we find that the assessee does conduct market research and provide market support to the AE. This functions include identification of the customer, market research, liaison and reporting. The assessee provides market information to the AE, responsible for studying and analyzing the market does the competitor profiling and provides for business development and interaction with the customers. Similarly, the comparable also does not market research which is financial research, provides marketing analytics, customer analytics, research analytics, sales analytics. Doing so the comparable also uses artificial intelligence and robotic process automation to some of the clients. The compara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be restrictive and not from one single partner only. MRSS prefers to be an aggregator of 'Market Research Technologies' and so would be the case in the area of 'Sensory Research'. The Company has transferred 50% Stake and control in Scent Analysis Majestic Pvt. Ltd. To Analysis the Scent International GmbH and its nominee on 28th December, 2016. 30. From the above, it is seen that there was no mergers/acquisitions in the instant year as contended by the assessee. In fact there was only divestment of shareholdings which has no impact in the instant year's P L account. And, the assessee company's contentions appear to be irrelevant and baseless as far as selection of the company as comparable is concerned. 31. On the issue of rejection by the TPO in the subsequent year we hold that the facts have been examined on year to year basis. During the instant year we find that the comparable is not beyond any filters applied and matches the FAR analysis. We need to look into and examine whether the comparable in question can be considered as right comparable which can be included TP Study for the year before us based on the functions, assets and ris ..... X X X X Extracts X X X X X X X X Extracts X X X X
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