Travelex India Pvt. Ltd. Vs DCIT (ITAT Mumbai)
Outcome: In favor of Assessee
Brief of assessee’s facts:
1. Travelex India (the assessee), a wholly owned subsidiary of Travelex Plc UK, was engaged in providing information technology enabled services (ITeS) to its AEs.
2. In order to benchmark the aforementioned transaction, the assessee chose TNMM as most appropriate method with OP/TC as profit level indicator. The assessee selected 20 companies as comparables with arithmetic mean of 9.93% against its margin earned at 16.04% and claimed its transaction at arm’s length.
3. Also, in its money changing business, the assessee pays interest to its AEs for delayed settlement of traveler’s cheques (TCs) and pre-paid cards (PPCs). The assessee benchmarks such transaction at LIBOR plus 200 basis points and claimed such transaction also at arm’s length.
Ld. TPO’s decision:
1. TPO completed the transfer pricing assessment and thereby:
a. Rejected the economic analysis of the assessee. Undertook a fresh search by selecting 13 companies as comparables with arithmetic mean of 24% against the assessee’s margin of 16.04%; and proposed an adjustment of Rs. 66,55,541/- to the income of the assessee.
b. Rejected the benchmarking done by the assessee for payment of interest on delayed settlement of TCs and PPCs at LIBOR plus 200 basis points and took the interest rates as specified for External Commercial Borrowings (ECBs) (for less than six months) as per RBI circular at LIBOR plus 50 basis points. Thereby, proposed an adjustment of Rs. 4,38,499.
Hon’ble DRP’s decision:
1. Hon’ble DRP rejected the assessee’s objections and upheld the decision of Ld. TPO.
Issue to be decided:
Aggrieved, the assessee filed an appeal before Hon’ble tribunal and
1. challenged following comparables regarding their exclusion:
