H & M MAURITZ INDIA PVT. LTD. vs. DCIT, BANGALORE

functional dissimilarity in view of the Tribunal order rendered in the case of M/s Adidas Technical Services Pvt.Ltd., (Supra) .

IT(TP)A No.282 & 490/B/2015 8

“8.3. We first take up the case of Apitco Ltd.,

(a) Apitco Ltd.:- Apitco Ltd. is a Public Sector Undertaking providing various support services for the development of tourism industry. Later the functional profile of the company had undergone a change, and it is now engaged in providing technical consultancy relating to asset reconstruction companies, management services, micro enterprise development, skill development etc. This is a government company. The fact that its operations are mainly based on the policy requirements of the government and the fact that it is a preferred company of the Government of India for entrustment of works, cannot be ignored. Be it as it may, in our considered 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.

IT(TP)A No.282 & 490/B/2015 9 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 International SOS Services Ltd. vs. DCIT in ITA 1631/Del/2014 order dt. 8.12.2015, at para 4 has held as follows.

“4. Global Procurement Consultant Limited:

12.6 The ld. Counsel for the assessee submitted that this is an 100% Government owned company as it is promoted by Exim Bank. He vehemently contended that functionally, this company is not a comparable, as it works with in the field of power, water resources, transportation industry such as economic, textile, mining, cement, leather, health education, environment, InfoTech etc. The pith and substance of the submission are that the areas in which this company provides support services is totally different from the type of support services provided by the assessee. He placed reliance on the decision of the Hon’ble Delhi High Court in the case of Rampgreen Solutions Pvt. Limited vs. CIT, judgment dated 10/08/2015 for the proposition that functionally dissimilar companies cannot be taken as comparables. He pointed out that decision of the Spl. Bench of the Tribunal in the case of Global India Pvt. Limited has been overruled by the Hon’ble Delhi High Court in ITA No. 7466/M/11 judgment dated 07/03/2004.

12.7 The ld. Departmental Representative on the other hand, pointed out that Global Procurement Limited is not a 100% Government of India owned company and that it is being

IT(TP)A No.282 & 490/B/2015 10 promoted by export import bank of India, as a private sector company in partnership with Leading corporate groups like MECON, ICCI, TCE Consulting Engineers Ltd. etc. She submitted that the functional profile is that of specialized support services, which required high profile skill and timely delivery of quality services, which is comparable with the functional profile of the assessee. 12.8 On a careful consideration of these arguments, we are of the considered opinion that this company should be taken as a comparable for the following reasons: a) This is not a 100% Government owned company as claimed by the assessee. Under the head “corporate synergy” it is stated that this company is co-promoted by the Export Import Bank of India as private sector Company along with a number of other Private Companies. b) The functional profile of this company is rendering of highly specialized procurement support services. The quality of service, the skills are comparable with the quality and skill of support 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

IT(TP)A No.282 & 490/B/2015 11 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 view of the above discussion. we are of the considered opinion that Global Procurement Consulting Limited has rightly be taken as the comparable by the TPO. Hence we dismiss this argument of the assessee. Consistent with the view taken therein, we agree with the Ld.TPO that this company has to be taken as functionally comparable. But this company is also undertaking many other activities such as valuation etc. The issue for consideration would be as to whether segmental data is available. If such data is available then the company has to be taken as a comparable. As the argument of the Ld.Counsel for the assessee is that there are no segmental results available, this company is directed to be excluded as a comparable.

(c) Quippo Valuers and Auctioneers Private Limited:- (QVAPL)

The Ld.Counsel for the assessee submitted that this comparable needs to be rejected for the reason that the functional profile is different from the assessee company as the company is engaged in providing asset management services as an auctioneer and valuer for construction equipment, earth moving machineries, commercial vehicles and other assets. It was further submitted that the annual report of the comparable is not available in the public domain for quantitative analysis. The Ld.D.R. submits that this company is functionally comparable as it is providing large gamut of services including allied business services to its IT(TP)A No.282 & 490/B/2015 12 clients. He further submitted that the company also qualifies the quantitative filters. On perusal of rival contentions, we find that the functional profile of the company Quippo Valuers and Auctioneers P.Ltd. is not similar to the functional profile of the assessee company. When a company is providing asset management services as an auctioneer and is also undertaking valuation of construction equipment, earth moving machineries etc. and when segmental data is not available, this company has to be, in our opinion, excluded from the list of comparables.

(d) TSR Darashaw Ltd.:- The TPO included this company on the ground that the company is providing business out sourcing services to clients in India. These services are provided to local clients and not the foreign clients and hence they are not similar to ITES services. The TPO observed that ITES companies have the advantage of location savings, while the business service companies do not have advantage. Since in this case the services are predominantly provided in India, the company is a correct comparable. He also held that the assessee had not gone into the verticals or high end or low end distinctions while selecting the comparables and has selected companies operating in various verticals. The TPO has also selected comparables which are broadly engaged in the field of marketing support services which has similar to the services provided by the assessee.

The Ld.Counsel for the assessee on the other hand submitted that the company is not functionally comparable. It is contended that there can be no comparison between a specific pay roll service rendered and marketing support service provided. It was contended that TSR Darashaw Ltd. is a IT(TP)A No.282 & 490/B/2015 13 broking and investment banking house and as 57.4% of its income is from the share registry services segment and hence not a comparable. Reliance is placed on the following decisions. i. Microsoft Corporation P.Ltd. vs. DCIT in ITA no.5766/Del/2011; ii. Premier Exploration Services P.Ltd. vs. ITO in ITA No.4935/Del/2011.

In our considered opinion TSR Darashaw Ltd. cannot be taken as a comparable 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

IT(TP)A No.282 & 490/B/2015 14 from each other. There can be no logical comparison between a specific pay roll services rendered by a company to its clients with the marketing support services rendered by the assessee to its AEs. This company is, therefore, directed to be excluded from the final set of comparables.”

Consistent with the view taken in the above case, we direct the AO/TPO to exclude this comparable.

IT(TP)A No.282 & 490/B/2015 15

Order pronounced in the open court on the date mentioned on the caption page.