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2012 (5) TMI 147 - ITAT CHENNAITransfer pricing - Application of Section 144C - eligible assessee - Appellant contended that as the TPO has not prescribed any adjustment in the Transfer Pricing order. So, the Assessing Officer had no jurisdiction to pass a draft order under sec. 144C(1). Therefore, the order is without jurisdiction and liable to be annulled. - held that:- it is necessary to see that the reference made to the TPO, the order passed by the TPO, the draft assessment order passed by the Assessing Officer and the directions issued by the DRP are all pre-assessment procedures of aid and guidance provided to the assessing authority by the statute. If any irregularity is committed by the Assessing Officer in following the above set of pre-assessment procedures, such irregularity does not make the assessment order illegal. At the best, it makes the order only irregular. - when the adjustments made by the Assessing Officer are deleted by the Tribunal, that irregularity is automatically cured. In such circumstances, the assessment order need not be invalidated. The assessment order does not become void ab initio. - Decided against the assessee. Regarding deduction u/s 10A - held that:- TPO has made a categorical finding that the operating profit reported by the assessee is higher than the profit worked out on the basis of ALP. - ALP is determined on the basis of the most appropriate method. Most appropriate method is chosen either on profit basis method or price basis method. In the latter case, profits are not at all considered. In that method, profit is only a derivative of prices. When profits itself not worked out, how it is justified to adopt ALP profits to determine what is "ordinary profits" for the purpose of sec. 10A(7)? - Assessing Officer has erred in reducing ₹ 4,48,50,795/- from the eligible profits of the assessee under sec. 10A. - Decided in favor of assessee. Regarding exclusion of foreign travel expenditure - held that:- if expenses are to be reduced from export turnover, they have to be reduced from the total turnover also, to maintain the parity. - Decided in favor of assessee. Disallowance made under sec. 14A - held that:- As quantification is not permissible under Rule 8D for the impugned assessment year, the disallowance has to be made on the basis of reasonableness and fairness. In the present case, the Assessing Officer has made a disallowance of ₹ 9,81,686/-. We modify the disallowance to a sum of ₹ 6 lakhs on a fair basis. This issue is decided partly in favour of the assessee.
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