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2014 (8) TMI 863 - AT - Income TaxTransfer pricing adjustments - Adjustment in the operating margin of CDR unit – Held that:- The TPO has computed the profit margin of the CDR unit, which was rendering the services not only to the associated concerns outside India but also to the other units of the Assessee company, by taking the revenue received from the export of services to the associated concerns and without taking any revenue into consideration in respect of the services rendered by the CDR unit of the Assessee to the other unit in Goa - the TPO has considered the total operating costs of the CDR unit which has been incurred by the unit not only in respect of services rendered to the associated concerns outside India but also in respect of services rendered to the unit in India and on that basis the operating profit was worked out. While computing the true profit of a particular division, it is necessary that the value should be assigned in respect of services received by the other unit and it should be taken as part of the revenue of that particular unit - the TPO has taken the total operating cost of the CDR unit which consists of the cost not only in respect of the services rendered to the associated enterprises but also in respect of the services rendered to the Goa plant by the CDR unit - since the total cost of the CDR unit has been taken, the notional revenue in respect of Goa plant should also be considered while computing the net operating profit - no addition in respect of IT-enabled engineering services can be made – Decided against Assessee. Adjustment of 12.31% of marketing expenses – Held that:- CIT(A) rightly was of the view that total marketing expenses, including those incurred in the company's European and Indian offices adopted - the TPO had netted off the Dubai office expenditure against the Dubai office income, without considering the ratio of total marketing expenses to total non-AE export sales as directed by the CIT(A) - no interference is called for in the order of CIT(A) - CIT(A) has rightly directed the AO to allow adjustment of 12.31% of the marketing expenses after verifying the correctness of the data submitted by the Assessee for allowing relief- Decided against Revenue. Deletion of the addition – Held that:- The purchase of the components and spares from the AEs constituted an insignificant 3% of the purchases - the Assessee has made purchases to the extent of more than ₹ 3 crores and in respect of other products, if taken together, the average price paid for imports are much lower than the average price of the local vendors - there is no inconsistency or illegality in the finding of the CIT(A) – Decided against Revenue. Claim of Depreciation on Goodwill – Held that:- Following the decision in CIT v. Smifs Securities Ltd. [2012 (8) TMI 713 - SUPREME COURT] - goodwill is an asset under explanation 3(b) to Sec. 32(1) – Decided against Revenue.
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