Held that the assessee being engaged in sub-contract works also, these sub-contracting expenses should be apportioned among the relevant segments. The assessee had itself accepted that Rs. 55.36 crores was towards employee cost for the business support services segment which the Transfer Pricing Officer had rightly distributed. The Transfer Pricing Officer was to apportion the rest of the amount of expenses under the head “other expenses” excluding the sub-contracting expenses according to the turnover of the segments of the assessee. The assessee also agreed to the apportionment on the basis of turnover. In the schedule of “other expenses” there were no separate employee benefit expenses, and each head of expenses had been characterised and debited with the amount incurred by the assessee and the assessee had also not provided details of the employee cost of Rs. 55.36 crores. In view of this it could not be said that the employee cost of Rs. 55.36 crores of expenses was included under the head of “other expenses”. The Transfer Pricing Officer was to apportion the expenses afresh among the segments of the assessee and re-calculate the margins. That the Transfer Pricing Officer was to exclude the four companies from the final set of comparables on the basis of the turnover filter as sought by the assessee. That working capital adjustment was to be given and it was a mandatory requirement to allow adjustment if the assessee was able to provide the reasonable and accurate data of the comparable companies. The assessee was to provide the necessary data to substantiate its claim before the Assessing Officer/the Transfer Pricing Officer. That the interest on receivables was an international transactions and interest on delayed receivables was to be benchmarked separately. In view of this the Assessing Officer/the Transfer Pricing Officer was to calculate the adjustment afresh after applying six months’ LIBOR plus 300 basis points with a mark-up of 100 basis points and decide the issue in accordance with law. The assessee is to provide the necessary documents.(AY.2017-18)
Quest Global Engineering Services P. Ltd. v.ACIT (2023)107 ITR 546 (Bang) (Trib)
S. 92C : Transfer pricing-Arm’s length price-Avoidance of tax-International transaction-Calculation of margins-Allocation of employee cost-Not proper-Selection of comparables-Turnover filter-Companies failing turnover filter up to Rs. 200 Crores to be excluded–Working capital adjustment mandatory requirement if assessee is able to provide reasonable and accurate data of comparable companies-Interest on delayed receivables to be benchmarked separately-Directed for adjustment afresh after applying six months’ Libor plus 300 basis points with mark-up of 100 basis points. [S.92CA]