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2017 (8) TMI 1627 - ITAT CHENNAIRevision u/s 263 - assessee by booking excessive expenditure in respect of non 10A unit, reduced the taxable profit and increased the eligible 10A unit, thereby the assessee claimed excessive deduction under Section 10A - assessee has not maintained separate books of account for the eligible 10A unit and non 10A unit - HELD THAT:- When the assessee specifically claims that one of the non 10A unit was in USA, the expenditure incurred in USA has to be recorded in the separate books maintained in USA, even though the assessee-company is Indian based. Otherwise, the branch at USA may not be able to carry out its financial transaction as expected. Further, without maintaining separate books of account for the purpose of expenses, it is not known how they are able to prepare Profit & Loss account for each unit. Therefore, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly exercised its jurisdiction under Section 263 of the Act. Convertible foreign exchange not received in India by the due date - HELD THAT:- Both the Ld. D.R. and assessee submitted that this issue is covered against the assessee by order of this Tribunal for assessment year 2008-09. In view of the above, this Tribunal does not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. Deduction u/s 10A - Exclusion of telecom expenses, travelling, software development charges, etc. from total turnover also - HELD THAT:- When the export turnover does not include telecommunication charges, travelling, software development charges for providing technical service outside India, the same shall also be excluded from total turnover. In other words, the export turnover and total turnover shall be of the same factor. The denominator and numerator shall consist of same factor. Once the freight, telecommunication charges, travelling, software development charges, etc. are excluded from export turnover, the same shall be excluded from total turnover also. In view of the above, this Tribunal is of the considered opinion that the Dispute Resolution Panel has rightly excluded the same from total turnover also. Hence, this Tribunal does not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. Determination of arm's length price under section 92C - selection of tested parties - HELD THAT:- In this case, Transaction Net Margin Method is the most appropriate method adopted both by the assessee and Transfer Pricing Officer. A bare reading of Rule 10B(1)(e) shows that the net profit margin realized by an enterprise from international transaction entered into with an Associated Enterprise has to be computed in relation to cost incurred or sales effected, etc. The main object is to compute the net profit margin realized by the enterprise from international transaction. The comparison shall be with regard to the transaction of unrelated enterprise from comparable uncontrolled transaction. Therefore, the net profit margin of the enterprise shall be computed in the international transaction by comparing comparable uncontrolled transaction. For the purpose of selecting tested party being a least complex party, as already observed, the functional risk assumed by the Associated Enterprise has to be established by producing material evidence. In this case, the assessee miserably failed to establish functional risk assumed by the Associated Enterprise. Under the scheme of Indian Income-tax Act, the transaction of the assessee, more particularly the international transaction of the assessee, has to be compared with that of other company’s transactions in comparable uncontrolled transactions. The main object of comparison is to determine the net profit margin of the assessee-company. Therefore, the transaction of assessee-company with Associated Enterprise outside the country has to be compared with that of the transaction of the comparable uncontrolled transaction of other companies. In view of the above, in the absence of any material on record with regard to risk assumed by the Associated Enterprise, the assessee-company has to be taken as tested party for the purpose of transfer pricing adjustment. Therefore, this Tribunal does not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. This Tribunal finds that the TPO has correctly selected the comparable companies. In view of this, this Tribunal does not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed
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