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2011 (8) TMI 1170 - ITAT CHENNAIDifference with ALP in respect of transactions with AEs - Costing Method adopted by AE's - The assessee-company has many ‘Associated Enterprises’ (AEs) with whom it has ‘international transactions' - The assessee-company has revenue billings with 2 AEs only upon which TPO has reproduced the working given by the assessee company of the profit margin in the case of transactions with those two AEs in which there is revenue billing and also with non-AEs. HELD THAT:- We are of the considered opinion that the majority view adopted by the TPO has to be reversed and the view taken by the single member of the DRP has to be upheld being found by us to be correct as per law. In our opinion, the majority view, that the internal comparables are reliable than external comparables, which gives a more precise computation of ALP is a wrong inference based on misconception of facts because the assessee has considered transactions of only with two AE's as compared with the non-AEs. There is no dispute in connection with the method of determination of AlP in applying TNMM in respect of transactions with AEs because the MAM and TNMM adopted by the assessee have been accepted by the TPO. TPO is not correct in observing that the transactions with AE at 40% and transactions with non-AEs at 2.44% do not reflect the true market conditions. She is not correct in her observation that the costs adopted by the assessee-company in arriving at the net margin of its transactions with its AEs and non-AEs needs to be rejected since the cost work is skewed(doctored). In our opinion, the assesseecompany has given proper explanation for the basis of costing adopted by the AE. There is no material on which the TPO has rested her above observation. We are not in agreement with the ld. CIT/DR when he submits that the assessee-company is not correct in splitting its results to suit its convenience. It is not a case of convenience, the assessee company is undeniably having revenue billing with only two AEs. The decision in the case of PANASONIC INDIA PVT. LTD. VERSUS ITO [2010 (9) TMI 682 - ITAT, DELHI], as suggested by the ld. CIT/DR, would not apply here. The simple reason being that the facts of that case are entirely different and distinguishable. Hence, with the force of the principle laid down in the above decisions regarding the scope and application of TNMM method fully support the assessee’s contention. This issue is, therefore, allowed in favour of the assessee and against the Revenue. Interest on Advances made to AE's - The assessee-company had paid some amount to two of its subsidiaries as advance during the financial year but it has not charged any interest from both the transactions. AO invoked the interest. The ld.AR has assailed the jurisdiction of the Assessing Officer to touch this issue of charging interest as it was not a part of DRP’s directions.- HELD THAT:- We hold that the Assessing Officer has jurisdiction to consider this issue, as per law and as per the majority view (DRP view). These advances have been made on account of commercial expediency only as has been claimed by the assessee-company. The Assessing Officer has not disproved the reasons given in this regard. Therefore, the cumulative effect of these factual matrix is that this interest has been wrongly charged. As a result, we allow this issue in favour of the assessee.
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