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2011 (5) TMI 196 - AT - Income TaxTransfer pricing - Net Margin Method - The assessee in the present case is a company which is engaged in the business of providing logistic and related services - The assessee company had entered into international transactions involving freight expenses and freight receipts with its associated enterprises - For the purpose of bench marking the said transactions, the assessee company prepared a detailed T.P. study by applying Transactional Net Margin Method (TNMM) and using "operating profit to value added expenses" (OP/VAE) as the price level indicator - The DRP does not agree with the view of the assessee, because for working out proper margins, the gross receipts and the gross expenses are the proper figures and there is no provision for excluding any item of expenses or receipt from the gross sales or gross expenses on the ground that such receipts or expenses does not represent any element of profit - There is no provision for segregating the accounts for excluding such items because it will give distorted picture and comparison will not be possible with the others who are dealing in the similar activity not following such method - Thus, the AO has rightly rejected the method of working out profit margin by the assessee." The decision of the Hon'ble Delhi High Court in the case of Vodafone Essar Ltd. as well as that of the coordinate bench of this Tribunal in the case of Gap International Sourcing India (P.) Ltd. and having regard to the fact that the DRP has passed the order giving directions to the AO under section 144C without giving proper consideration to the elaborate submissions made on behalf of the assessee on the main preliminary issue - Hence, set aside the said order and remit the matter to the file of the DRP with a direction to consider the objections of the assessee on this issue as well as the other issues once again and pass a proper and speaking order giving direction u/s 144C.
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