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2013 (1) TMI 369 - ITAT MUMBAITransfer pricing adjustment made by the TPO - operating margin to be taken at 11.96% or 9.47% as taken by assessee - assessee is a domestic company formed by a shareholding between Sitel Group & TATA group with 50% stake each - Assessee in the TP study used TNM method to benchmark its ALP for its transaction with AE - CIT (A) has not only shifted the method adopted by assessee and the TPO but also changed the "tested party" - Held that:- Assessee's TP study has not been considered by the TPO as vide Annexure-D to the TP study assessee has selected ten comparable companies and summary of net cost + margin varies from -6.04% to 19.06%. Mean arrived at assessee's TP study was at 9.47%. How this amount was rejected and why it is fixed at 11.96% could not be discerned from the order of the TPO, as it is very brief without any discussion. Further when assessee raised arguments on various issues and submitted that the total profits earned by the AEs and assessee put together and furnished the information how the profits are apportioned between the AE and assessee, the CIT (A) shifted tested party from assessee to AE and that too only two AEs were accepted in which there were profits, ignoring the AEs which incurred losses on various projects. Even after considering the profit companies, the CIT (A) arbitrarily fixed the margin at 6% without there being any basis and arrived at the TP adjustment restricting to Rs. 54,56,479. Therefore, neither the TPO's order can be considered as appropriate nor the order of the CIT (A) on the given facts of the case - even though the method of TNM was accepted, the CIT (A) went by profit split method and further restricted to two AEs by shifting the tested party from assessee to AE, in view of this, the matter should be restored to AO for fresh consideration by the TPO. Treatment of interest on term deposit receipts and miscellaneous income - Held that:- Undisputedly the assessee is not in regular business of lacing various deposits and therefore, the interest income has no direct or live connection with the business undertaking of the assessee and particularly, the export articles or things and computer software. Thus in view of the decision in the case of Liberty India (2009 (8) TMI 63 - SUPREME COURT) interest earned by the assessee on surplus funds deposit in the bank does not come under the first degree of source of profit derived from profit of business of undertaking. Accordingly, this issue is decided against assessee. Deduction under section 10A - Held that:- As decided in Sak Soft Ltd's case [2009 (3) TMI 243 - ITAT MADRAS-D] & CIT v. Gem Plus Jewellery India Ltd.[2010 (6) TMI 65 - BOMBAY HIGH COURT] whatever is excluded from the export turnover has to be excluded from the total turnover also while computing the deduction under section 10A. In view of this, AO is directed to exclude the communication line charges from the total turnover as well.
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