M/S TRAVEL SECURITY SERVICES (INDIA) PVT. LTD.,,NEW DELHI vs. DCIT, NEW DELHI

The only issue raised in this appeal is against the addition on account of transfer pricing adjustment.

Briefly stated, the facts of the case are that the Travel Security Group (TSS, UK) is a joint venture between Control Risks Group (a UK based security services firm) and Blue Cross Travel Services B.V. (an International SOS group company). TSS UK provides a comprehensive corporate security programme catering to its clients. The corporate security programme involves travel security services for international travelers and expatriates including analysis, assistance and consultancy.

The assessee is a subsidiary of TSS UK which was incorporated in India on 03.07.2008. During the year under consideration, the assessee rendered the following support services to TSS UK:- � Analysis and advice on any security threats globally; � Security information and guides; � Analyze shifting political and social situations as well as natural disasters; � Weekly regional security forecast; � Country and risk ratings; � Updates on incidents and developments, including evacuation advisories; and � Medical alerts, pandemic information services as well as up-to-

An international transaction of ‘Provision of travel security services’ with a transacted value of Rs.5,38,27,610/- was declared in Form No.3CEB. The AO made a reference to the Transfer Pricing Officer (TPO) for determining the ALP of this international transaction.

We have heard the rival submissions and perused the relevant material on record. There is no dispute as regards the application of TNMM as the most appropriate method and OP/TC as the PLI for the international transaction of `Provision of travel security services’. In fact, the entire challenge is confined to retaining two companies in the list of comparables, namely, Apitco Ltd. and TSR Darashaw Limited.

In order to judge the comparability or otherwise of these two companies, it is sine qua non to consider the functional profile of the assessee. We have referred to the nature of activities done by the assessee hereinabove from which it is apparent that the assessee is engaged in providing travel security services to its AEs which are meant for the clients of the latter. Such services include Analysis and advice on any security threats globally; Security information and guides; Analyze shifting political and social situations as well as natural disasters; Weekly regional security forecast; Country and risk ratings; Updates on incidents and developments, including evacuation advisories; and Medical alerts, pandemic information services as well as up-to-date reporting on outbreak of medical diseases. From the above nature of services, it is manifest that the assessee, in a nutshell, is engaged in providing travel security services. With the above understanding of the functional profile of the assessee, let us examine the comparability or otherwise of the above referred two companies in seriatim.

The TPO proposed the inclusion of this company which was objected to by the assessee. It was stated that this company was primarily engaged in providing high end consultancy services by preparing project feasibility reports and carrying out market/other service and, hence, functionally different. The TPO refused to accept the assessee’s contention and eventually included it in the list of comparables. No relief was allowed by the DRP.

We have heard both the parties and perused the relevant material available on record. The TPO has reproduced on page 14 of his order the objections raised by the assessee before him on the comparability of this company. It has been recorded that this company earned total revenue of Rs.1270.74 lacs, which includes: Cluster Development Rs.494.86 lakhs; Project Related Services Rs.365.66 lakhs; Entrepreneurship Development & Training Rs.102.56 lakhs; Asset Reconstruction & Management Services Rs.60.51 lakhs; Micro Enterprises Development Rs.57.29 lakhs; Tourism & Research Studies Rs.41.86 lakhs; Skill Development Rs.33.00 lakhs; Energy Related Services Rs.23.21 lakhs; Environment Management Rs.15.38 lakhs and Other income Rs.76.41 lakhs.

A careful perusal of the operations carried out by Apitco Limited deciphers that this company is providing services in the nature of Project report preparation, Technical and economic studies, Feasibility studies, Micro enterprise development, Skill development, Project management consulting, Industrial cluster development, Environmental management consulting, Energy management consulting, Market and social research and Asset reconstruction management services. No segment-wise profitability data of these services is available. The TPO has considered this company as comparable on entity level. We find that there is a little resemblance of the revenue from Tourism & Research studies Rs.41.66 lakh with the overall activities undertaken by the assessee. Under such circumstances, we fail to appreciate as to how all the above listed services undertaken by this company as one unit can be considered as comparable with the tourists’ safety services provided by the assessee.

The ld. DR strenuously argued that all the activities done by this company are basically `Business services' and the assessee is also rendering business services. He submitted that differentiation of functions in the overall `Business services' umbrella is taken care of under the TNMM. He harped on the contention that there is no requirement to have identical services for the purpose of making comparison under the TNMM.

We are unable to accept this argument in view of the judgment of the Hon'ble jurisdictional High Court in the case of Rampgreen Sales Pvt. Ltd. vs. CIT (2015) 377 ITR 533 (Del) in which it has been held that the comparables are to be selected on the basis of similarity even under TNMM. The Hon'ble High Court has laid down that selection of comparables does not differ with the method adopted. Ex consequenti, it is no more open to argue that the functional dissimilarity of the companies under the overall broader category can be ignored under the TNMM.

In view of the foregoing discussion, we find the functional similarity of Apitco Limited wanting on entity level with the assessee company. As such, we order for its exclusion from the final set of comparables.

The TPO selected this company as comparable. There is no discussion whatsoever about the functional profile of this company in the order of the TPO. The DRP approved the inclusion of this company, against which the assessee has approached us.

Having heard the rival submissions and perused the relevant material on record, we find that this company is a broking and investment banking house. As per its website, TSRDL is one of India's leading Business Process Outsourcing (BPO) organizations certified under ISO 9001:2008 guidelines having a total industry experience of over 35 years. TSRDL has state-of-the-Art IT capabilities and well trained HR which are the key requirements for handling BPO activities.

A narration of the foregoing activities undertaken by this company abundantly shows that there are striking dissimilarities with the assessee’s tourists’ safety services. We, therefore, order for the exclusion of this company from the final set of comparables.

To sum up, we set aside the impugned order on the issue of addition towards transfer pricing adjustment and remit the matter to the file of AO/TPO for fresh determination of the ALP of the international transaction in consonance with our above directions. Needless to say, the assessee will be allowed a reasonable opportunity of being heard in such fresh proceedings.

Before parting with this appeal, we want to record that the ld. DR vehemently argued that the companies included by the assessee in the list of comparables are also functionally dissimilar and, hence, those should also be excluded. This was submitted in the background of the above referred two companies, namely, Apitco Ltd. and TSR Darashaw Limited., which, in his opinion, were also not functionally similar. It was however stated that the assessee in the transfer pricing study report has itself admitted that exactly similar companies were not available.

We are not persuaded to accept this contention put forth on behalf of the Revenue. It goes without saying that the companies offered by the assessee as comparable, when accepted by the TPO as comparable, become final and hence cannot be challenged by the ld. DR. We need to accentuate on the role of the ld. DR, which is confined to supporting the assessment order and not raising a contention contrary to the Assessing Officer/TPO. If the AO goes wrong in deciding a particular thing, then there are other remedies provided in the statute. In no case, the ld. DR can usurp the power of the AO and argue contrary to the decision of the AO/TPO. In our considered opinion, once the TPO has accepted certain companies as comparable and there is no appeal by the Revenue, the ld. DR cannot contend for excluding any company, which was accepted by the TPO as comparable. In view of the foregoing discussion, we are of the considered opinion that the argument of the ld. DR for excluding certain companies from the list of comparables which have been accepted by the TPO as such, cannot be countenanced.

In the result, the appeal is allowed for statistical purposes.