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TMI Blog2023 (8) TMI 1420X X X X Extracts X X X X X X X X Extracts X X X X ..... hnologies private limited [ 2021 (7) TMI 1428 - ITAT MUMBAI] We direct the Assessing Officer/TPO to exclude Axis Integrated System Limited and Killick Agencies and Marketing Limited as comparable. Spectrum Business Solutions Limited is an Internet marketing company inter-alia engaged in admin support services like Virtual Assistant and research and management etc. All the assets necessary for conducting the business will be employable by the assessee and assessee does not own any intangibles. It is totally different from the internet marketing company which is engaging admin support services through virtual basis and also it has research and management etc., these are all the functions performed by the Spectrum Business Solutions Limited which is completely different from the services provided by the assessee. As discussed above, assessee does not own any intangible assets and all the marketing services involved are the informations gathered from the market data whereas the Spectrum Business Solutions Limited, it is performing research and management services and also employs virtual assistants which is mainly based on virtual software. Further, we observe from the financ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Contribution to employee stock option and purchase plan (ESPOP) 14,33,95,470 At cost Recovery for stock option taxes for employees 30,61,78,439 At cost ECB loan Borrowed 65,90,00,000 3. At the time of hearing, Ld. AR of the assessee brought to the notice of the bench, letter dated 17.03.2023 in which assessee has submitted before the bench that the appeal is preferred by the assessee against the adjustments made by the Assessing Officer in the final Assessment Order. The transfer pricing adjustments have been made in connection with provision of Software Development Services (SDS), Information Technology Enabled Services (ITeS), mark-up on ESPP costs and Marketing Support Services (MSS) to its Associated Enterprises. With a view to resolve the transfer pricing dispute, one of the AE of the assessee i.e. Juniper Networks Inc. had filed a request with the Competent Authorities pursuant to Article 27 ('MAP') of the India United States Tax Treaty. The MAP Application was filed on 18.05.2022 for AY 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has submitted the objections before Ld. DRP and Ld. AR brought to our notice nature of the business and FAR analysis and reasons for rejection of the same to be considered as comparable, for the sake of clarity we are reproducing chart as under:- Sr.No. Name of the Company Brief Nature of business conclusion 1. Axis Integrated System Limited Failing the export to sales filter of 75% As per the note 25 in the financial statements the company does not have any export earnings and thus the said company fails the export turnover filter applied by the learned TPO. Failing turnover filter One of the filters proposed to be applied by the TPO is Reject companies which having turnover of 10 times lower and 10 times higher of the turnover of the company. Functions/ Business: The has earned substantial income/revenue from liasoning activities. Website details: Company is engaged in the business of providing DGFT, Customs / Excise and service tax related services. The comparable com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the customers designated places. Therefore, the revenue includes commission income also, therefore this company is employing different business module and in this regard he brought to our notice following cases in which this company is rejected as comparable by the different benches of the Tribunal. i. Salesforce.com India Private Limited v. DCIT [TS-140-ITAT- 2021 (Bang)-TP] (24- 03-2022). ii. Sabre Travel Technologies Private Limited vs. DCIT (2021) 130 Taxmann.com 217 (Mumbai - tribunal) (14-07-2021). iii. Mavenir India Pvt. Ltd (earlier known as Comverse Network System India Pvt. Ltd.), vs. DCIT 141 taxmann.com 160 (Delhi - Trib.) [17-05-2022] iv. Arm Embedded Technologies Pvt. Ltd., vs DCIT 143 taxmann.com 403 (Bangalore - Trib.) [30-08-2022] v. Citrix Systems India (P.) Ltd. vs. DCIT 118 taxmann.com 588 (Bangalore - Trib.) [20- 03-2020] vi. Hyundai Rotem Company vs. ACIT (International Taxation) 120 taxmann.com 466 (Delhi - Trib.) [02-03-2020] vii. Electronics for Imaging India Pvt Ltd vs. DCIT 70 taxmann.com 299 (Bangalore Trib.) [24-02-2016] 12. With regard to inclusion of the comparable Spectrum Business Solutions Limite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... serving that similar functions being performed by both the companies. 15. Further, he brought to our notice Page No. 93 of the Paper Book which is the segmental profit and loss statement of the assessee company in which the segment financials are reported for MSS in which assessee has declared revenue of ` .61,84,66,224/- and recorded employee cost expenses of ` .37,78,61,725/- (61%). Therefore, he prayed that the cost structures are same to the Spectrum Business Solutions Limited hence this has to be included as comparable of the assessee company. 16. On the other hand, Ld. DR agreed that most of the grounds are covered by the MAP proceedings. With regard to submissions of the Ld.AR to exclude Axis Integrated System Limited as comparable he relied on the findings of the lower authorities which is a covered issue. With regard to Killick Agencies and Marketing Limited he brought to our notice Page No. 108 of the Paper Book wherein the functions of the company are reported by the assessee itself has considered for inclusion which are similar to the functions performed by the assessee. Therefore, now assessee cannot argue that this comparable should be excluded. 17. With rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised Representative for the Appellant during the course of the hearing (recorded in paragraph 4 above), all the other grounds raised by the Appellant are disposed as being academic. 20. With regard to Killick Agencies and Marketing Limited, we observe that this company is acting as agent for various foreign principals for sale of Dredgers, dredging equipment, Steerable Rudder Propellers, Maritime and aviation lighting, Acoustic communication equipment etc., and it also offers after sales services. Further, this company is involved in exports of micro switches, engineering items, acoustics items head-sets. It has declared income which consist of commission and services income and it has not bifurcated the commission and other services income. Therefore, there is no segmental reporting of agency and other services. We also observe that it has recorded the royalty expenditure which is almost 30% of the income earned by them. We observe that Coordinate Bench in the case of Sabre Travel Technologies private limited v. DCIT (supra) in ITA.No. 7306/Mum/2017 dated 14.07.2021 has excluded this comparable with the following observations: - 5.10.2. The Id. AR also submitted that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able. 22. Coming to inclusion of Spectrum Business Solutions Limited as comparable, we observe that Spectrum Business Solutions Limited is an Internet marketing company inter-alia engaged in admin support services like Virtual Assistant and research and management etc. Whereas the assessee services are as under: - During the year under consideration, the assessee had rendered certain marketing support services to its AEs i.e. Juniper Hong Kong and Juniper Netherlands. As per the agreement entered into between Juniper India and its AEs, for undertaking the said services Juniper India had earned a mark-up of 11 percent on its cost. Under this segment the assessee is involved in gathering market data, providing analysis of the competitive positions and identifying potential markets and customers where Juniper Hong Kong and Juniper Netherlands could make entry with its range of products. The assessee also identifies potential business opportunities and events to disseminate information regarding the AE's products and services. The significant portion of AES sales in India is carried out through distributors and channel partners. The role of assessee is limit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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