DCIT Vs. ROLLS ROYCE MARINE INDIA PVT. LTD.
INCOME TAX APPELLATE TRIBUNAL
Rolls Royce Marine India Pvt. Ltd.
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R.C.Sharma, Member (A) -
(1.) THIS is an appeal filed by the Revenue and Cross Objection by the assessee against the order passed under Section 143(3) read with Section 144C(13) of the IT. Act, 1961, giving effect to the order of DRP passed u/s. 144C(5) of the I.T. Act, wherein following grounds have been taken by the Revenue: -
(i) Whether on the facts and circumstances of the case and in law, the Hon'ble DRP was correct in directing the TPO to exclude Basiz Fund Services Pvt. Ltd., Cameo Corporate Services Ltd., Cyber Media Research Ltd., ICRA Management Consulting Services Ltd. And Rockman Advertising & Marketing India Ltd. as comparables for determining ALP?
(ii) Whether on the facts and circumstances of the case and in law, the Hon'ble DRP was correct in directing the Assessing Officer to exclude the comparables without appreciating the fact that the assessee company as also the comparables were functionally similar in so far as marketing support services are concerned?
(2.) THE appellant prays that the order of the DRP on the above grounds be set aside and that of the A.O. be restored.
Grounds taken in Cross Objection by the assessee read as under: -
1. In respect of Comparable companies selected by the Respondent:
On the circumstances of the case and in law, the Hon'ble DRP has erred in directing the learned AO/TPO to exclude 2 comparable companies i.e., ICRA Management Consulting Services Ltd. and Rockman Advertising & Marketing (India) Ltd. selected by the respondent, on the basis that these comparables are consistently loss marking companies. The respondent submits that these 2 comparables have earned operating profits in the immediate preceding 2 years & only in the year under consideration these companies have suffered operating losses and hence, the directions of the Hon'ble DRP is factually incorrect.
2. In respect of Comparable companies selected by the learned TPO:
Without prejudice to the above, on the circumstances of the case and in law, the Hon'ble DRP has erred in directing the learned AO/TPO to retain 2 comparable companies i.e., HCCA Business Services Pvt. Ltd. and TSR Darashaw Ltd. selected by the learned TPO, on the basis that these comparables are functionally comparable to the activity of the respondent. The respondent submits that these 2 comparables are not functionally comparable to the marketing activities of the respondent, and hence should be excluded from the comparable list.
2. At the outset, it was contended by the learned AR that tax effect in the appeal filed by the Revenue is below Rs. 3 lakhs, therefore, as per CBDT Circular, appeal of the Revenue is not maintainable and deserves to be dismissed on the ground of low tax effect only. He further contended that the DRP has selected three comparable of TPO and brought back 9 comparable of assessee as against 11 comparables originally proposed by the assessee. By reading grounds of appeal filed by the Revenue, learned AR contended that the Revenue has come in appeal for exclusion of comparables by the DRP, which is not justified.
In the cross objection the assessee has taken the ground to the effect that the DRP has erred in directing the AO/TPO to exclude 2 comparable companies i.e. ICRA Management Consulting Services Ltd. and Rockman Advertising & Marketing (India) Ltd. selected by the assessee. The assessee has also taken the ground with regard to the direction of DRP to retain two comparable companies i.e. HCCA Business Services Pvt. Ltd. and TSR Darashaw Ltd. selected by the TPO.
(3.) RIVAL contentions have been heard and record perused. Facts in brief are that assessee M/s. Rolls -Royce Group (Marine Division) (in short 'RRM') is a global leader in power propulsion and motion control systems. It offers a product portfolio ranging from vessel design and gas turbine engines to water jets and deck handling equipment. RRM India is part of Marine division of Rolls -Royce Group. RRM India is engaged in the business of providing marketing & sales support, assembling services and after sales services to the Group for its activities in India and to third party clients. The various international transactions entered into by RRM India were categorized into 3 segments based on the nature of activities and functions performed i.e. after sales services, Assembly and Delivery Management Services and Marketing & sales support services. RRM India prepares a 'Transactional Profit & Loss Account' for ascertaining the margins earned by it from each category of the transactions.;
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