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TMI Blog2019 (10) TMI 1580X X X X Extracts X X X X X X X X Extracts X X X X ..... e company, the question of deduction of tax does not arise. The assessee also made a statement at the bar that the Revenue has accepted the decision of the Tribunal and has not filed any appeal before the Hon ble High Court. We, therefore, dismiss the ground raised by the Revenue challenging the deletion made by the Assessing Officer for non-deduction of tax from the payments made to Outotec Oyj. The ground raised by the Revenue is accordingly dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... , accordingly proposed the adjustment of Rs. 56,78,697/- as suggested by the TPO. 6. Further, during the course of assessment proceedings, the Assessing Officer noted that the assessee has made a payment of Rs. 1,62,88,677/- to Outotec Oyj as service fees on which no tax has been deducted. The Assessing Officer, therefore, asked the assessee to explain as to why provisions of section 40(a)(i) should not be applied. It was explained by the assessee that tax was not deducted on payments made to Outotec Oyj since Outotec Oyj is a tax resident of Finland and, therefore, the provisions of DTAA between India and Finland will be applicable. The provisions of section 90(2) was brought to the notice of the Assessing Officer according to which a non-resident has the option to be governed by the provisions of the Act or DTAA whichever is more beneficial to them. Therefore, Outotec Oyj being a tax resident of Finland can avail the benefit under the provisions of DTAA. It was explained that the services rendered by Outotec Oyj are not taxable as FTS under the Article 13(4)(c) of the DTAA due to restrictive function provided under the Indo-Finland DTAA. Article 13 of the India-France DTAA, Arti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) of the Act. So far as the comparables are concerned, the Ld. DRP directed the TPO to exclude M/s. Global Procurement Consultants Ltd., from the list of comparables. The Assessing Officer, thereafter, passed the order determining the total loss of the assessee at Rs. 3,16,92,110/-. 8. Aggrieved with such order of the A.O./TPO/DRP, the assessee is in appeal before the Tribunal by raising the following grounds:- "That on facts and in the circumstances of the case, the order of the Transfer Pricing Officer (hereinafter referred to as "Ld. TPO") passed u/s. 92CA(3) of the Income-tax Act, 1961, (hereinafter referred to as the 'Act'), subsequently to the extent confirmed in part by the Dispute Resolution Panel, Kolkata (hereinafter referred to as "Ld. Panel") and consequently incorporated by the Deputy Commissioner of Income Tax (hereinafter referred to as "Ld. AO") in the assessment order u/s. 143(3) read with section 144C(13) of the Act, is erroneous on facts and bad in law. 1. That on the facts and in the circumstances of the case the Ld. Panel erred in making an adjustment of Rs. 50,26,689/- to the international transactions pertaining to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services to third parties. Referring to page 3 of the TPO's order, he drew the attention of the Bench to the FAR analysis made by the TPO and submitted that this company has no intangibles and has got only manpower. So far as the four comparables proposed by the TPO and upheld by the DRP are concerned, he submitted that all the above four comparables have been held to be not comparable in various decisions. Referring to the decision of the coordinate Bench of the tribunal in the case of Adobe Systems India Pvt. Ltd. vs. ACIT and vice versa vide ITA No. 6165/Del/2015 and 6287/Del/2015, order dated 6th July, 2018, he submitted that this company was also engaged in marketing and promoting the products and services of Adobe group. After considering the comparables selected by the TPO in the market support service segment, the Tribunal has held MMTV Ltd., Aptico Ltd. and TSR Darashaw Ltd. and Info Edge (India) Ltd., as not comparable and has directed the TPO to exclude these companies from the list of comparables. Referring to the decision of the coordinate Bench of the Tribunal in the case of DCIT vs. Tejin India Pvt. Ltd., vide ITA No. 6625/Del/2015, order dated 25th January, 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that in the case of Adobe Systems India Pvt. Ltd., the Tribunal while deciding the issue has discussed the provision of market support segment and has directed the TPO to exclude the comparables and, therefore, the argument of the Ld. DR that the functions performed by Adobe Systems India Pvt. Ltd., is different from that of the assessee is not correct. 14. We have heard the rival arguments made by both the sides and perused the record. We find, the assessee, in the instant case is engaged in the business of providing marketing, supervising and support services for the mining/meteorological/metals & minerals processing industry. The segment of market support services has been benchmarked by the assessee using TNMM as the most appropriate method and OP/TC as the PLI. The assessee has considered four comparables with average margin of 11.20%. Since the margin of the assessee was shown at 10.75%, therefore, it was argued that the transactions with its AEs are at arm's length. We find the TPO disregarding the TP study analysis made by the assessee made fresh search and added nine more comparables whose weighted average was 19.29% and, accordingly, proposed addition of Rs. 56,78 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isory services and financial audit for projects in India and abroad which is evident from page 1, 3, 15 and 16 of the annual report. We further find this company was rejected by the Tribunal in assessee's own case for assessment year 2010-11 and no appeal was filed by the Department before the Tribunal. We, therefore, uphold the order of the DRP in holding that this is a functionally different entity and hence does not make a good comparable in MMS function. 31. So far as TSR Darashaw Limited is concerned, we find this company is engaged in share registry and transfer services, depository services, record management, payroll and provident fund management and corporate fixed deposit management which are in the nature of IT enabled services as evident from page 21 of the annual report. We, therefore, uphold the order of the DRP in holding that this is functionally different entity. Further, this company was rejected by the Tribunal in assessee's own case for assessment year 2009-10 and the DRP in assessee's own case for assessment year 2010-11 and no appeal was filed by the Revenue before the Tribunal. We, therefore, uphold the order of the DRP in excluding the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal in the case of Teijin India Pvt. Ltd. (supra) and various other decisions, has directed the A.O./TPO to exclude: MMTV Ltd.; TSR Darashaw Ltd. and Info Edge (India) Ltd., from the list of comparables by observing as under:- "7. We have heard both the parties and perused the material available on record. From the annual reports of each of the comparables contested by the Revenue it can be seen that comparables are functionally dissimilar to the assessee company. These comparables are considered in case of Adobe Systems India Pvt. Ltd. (supra) for the same Assessment Year 2011-12 and from the perusal of the Tribunal's order it can be seen that these comparables are functional different than assessee's company. The Tribunal held as under for each of the comparables for A.Y. 2011-12 regarding marketing support services: 25. We have considered the rival arguments made by both the sides and perused the material available on record. So far as MMTV Ltd. is concerned, the DRP excluded this company from the list of comparables on the ground that this is functionally different entity and does not make a good comparable to the assessee in MSS function. Further, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diversified services such as recruitment related, real estate related, matrimonial related services and owns significant Rolls Royce India Pvt. Ltd. Vs. DCIT ITA No. 6636/Del/2015 Assessment Year 2011-12 intangibles/websites such a naukri.com, 99 acre.com etc. Therefore, this company is functionally different as it is providing an advertisement space as well as online portal based on subscription by the buyer and seller of the services compared to services provided by the assessee of marketing support services. In view of this we direct Ld. TPO for exclusion of this comparable." 41. Similarly, the Tribunal in the case of Linkedin Technology Information Pvt. Ltd. (supra) has directed the TPO to exclude this company from the list of comparable. 42. Following the above two decisions and considering the fact that the functions of Info Edge (India) Ltd. is different from that of the case of the assessee, we hold that the above company is not a comparable. We accordingly direct the Assessing Officer/TPO to exclude this company from the list of comparables." The assessee company is engaged in provisions of marketing support services to Teijin-Japan and other group companie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idered opinion, the functional profile of this company is different from that of the assessee company and hence the same should be excluded from the list of comparable companies while computing the ALP. (b) Global Procurement Consultants Ltd.:- The Ld. Counsel for the assessee submitted that the functional profile of the company is different and that Global Procurement Consultants Ltd. is merely rendering services to government bodies and international organisations. It was further submitted that it is engaged in providing varied services in consultancy segment which are as follows. (a) Bid support services; (b) Performance review; (c) Valuation assignments; (d) Financial advisory services and other assignments. It was further argued that no segmental details are available and hence it cannot be taken as a comparable. The Ld. D.R. submitted that this comparable company as a client's representative in taking on the total responsibility of procurement by providing the comprehensive range of procurement related advisory services at inter-allied activities for projects in India and abroad and hence is functional comparable. The ITAT Delhi I-2 Bench in the case of Intern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t services provided by the assessee, though in functionally different areas. As the Ld. Counsel for the assessee has accepted before us that comparable companies rendering services in the same field as that of the assessee company cannot be found companies rendering support services in other fields have to be taken as comparables. c) We have also perused the decision of the Hon'ble Jurisdictional High Court in the case of Rampgreen Solutions Pvt. Ltd. (supra). The claim of the Ld. Counsel for the assessee is based on the propositions laid down in this case law. If on such an argument, the comparable Global Procurement Consulting Limited is excluded, then all the other comparables cited by the assessee as well as the Ld. TPO have to be excluded on the same principle. This will leave us with no other comparable. The assessee cannot advance contradictory arguments. As it has been accepted by both the parties before us that, companies having a broad functional profile of rendering skilled professional support services, should be taken as comparable companies, the proposition laid down in Rampgreen Solutions Pvt. Ltd. (supra), cannot be applied to the facts of the case on hand. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as 57.4% of its income is from share registry services segment. This shows the functional profile of the assessee is different. In the case of Miscrosoft Corporation Ltd. (supra) at para 1 the Tribunal has held as follows. "Coming to the merits of comparability, we find that this company has three segments, which inter alia include: 'Pay Roll and Trust Fund activity (Pay Roll)'. It is this segment which has been considered by the assessee as comparable. This company on an overview is a broking and investment banking house. Its other segments are : 'Registrar and Transfer Agent activity (R&D)' and 'Records management activity (Records)'. The segment of 'Pay Roll' was considered by the assessee as comparable in its TP study report and the same is now assailed. Under the 'Pay Roll' segment, this company undertakes pay roll and employee trust fund administration and management. When we compare the nature of pay roll activity undertaken by this company with the marketing support services rendered by the assessee to its AEs, we find that both are way apart from each other. There can be no logical comparison between a specific pay roll services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icle 13(4) as under: 4. For the purposes of paragraph 2, and subject to paragraph 5, the term 'fees for technical services' means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including the provision of services of technical or other personnel) which: (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in sub-paragraph (a) of paragraph 3 is received; or (b) are ancillary and subsidiary to the enjoyment of the property for which a payment described in sub-paragraph (b) of paragraph 3 is received; or (c) make available technical knowledge, experience, skill, know-how or processes, or consist of the development and transfer of a technical plan or technical design. However. Indo-Finland DTAA (2010) defines FTS in Article 12(3)(b) as under: b) The term 'fees for technical services' as used in this Article means payments of any kind, other than those mentioned in Articles 14 and 15 of this Agreement as consideration for managerial or technical or consultancy services, including the provision of services of technical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 40a(i) is not warranted. 6.4 The panel has further noted that delivery of management services has not been disputed and the AO could not establish that payments made were not wholly and exclusively for the purpose of business of the assessee. Therefore, provisions of section 37(1) of the Act are not attracted. The objection is accordingly allowed." 20. We find the Kolkata Bench of the Tribunal in the case of Outotec Oyj (supra) has held that the amounts received by the assessee from Outotec India Pvt. Ltd., does not qualify as FTS as per DTAA. We find the Tribunal at para 3 of the order has brought out the facts as under:- "3. The brief facts of this issue is that the assessee company is a tax resident of Finland and is engaged inter alia in the business of providing innovative and environmentally sound solutions for a wide variety of customers in metals and mineral processing industries. The assessee filed a NIL return for the Asst Year 2010-11 on 28.3.2012. During the year under ITA No. 558/Kol/2014 & 462/Kol/2015 Outotec Oyj, AY 2010-11 & 2011-12 consideration, the assessee earned revenue from management support and other services. These services are provided to i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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