TMI Blog2014 (11) TMI 722X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellant : Sh. Ajay Vohra, Neeraj Jain, Advs. Sh. Puneet Chugh, Abhishek Aggarwal, CAs For the Respondent : Sh. Yogesh Kumar Verma, CIT DR ORDER Per Diva Singh, JM This is an appeal filed by the Revenue against the order dated 28.01.2013 of CIT(A)-XX, New Delhi pertaining to 2007-08 assessment year on the followings grounds:- 1. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of ₹ 1,53,03,888/- on account of Arm s Length Price of international transaction made by the Assessing Officer/TPO? 2. The appellant craves leave, to add, alter or amend any ground of appeal raised above at the time of the hearing. 2. The relevant facts of the case are that the assessee filed his return on 31.10.2007 declaring a loss of ₹ 2,80,58,787/- which was processed u/s 143(1). The case was selected for scrutiny after issuance of notice u/s 143(2) and questionnaire etc. u/s 142(1). The record shows that the assessee is a 100% subsidiary of Destination of the World Holding Establishment, Liechtenstein and engaged in the business of rendering inbound, outbound and domestic travel services to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is 4.76% and that in unrelated segment is 6.25%. It was submitted that since the profit margin was within the range of +/- in terms of proviso to section 92C(2) of the Act, it was claimed that it is demonstrated that the international transaction was at arms length price. 3.3. However the TPO did not accept the claim of the assessee. Analyzing the method employed by the assessee, he was of the view that there is not much difference in inbound and outbound activities of the company and the assets utilized in both the segments were similar. He further held that the transfer pricing report did not furnish any risk analysis in the two segments. He was also of the view that the segments drawn were also not accurate since no separate segmental details were mentioned in the audited accounts certified by the chartered accountants. He also observed that the Profit and Loss account also does not mention two different lines of business as claimed in the transfer pricing report. As a result, the TPO concluded that the segmental information has been created to arbitrarily allocate the cost and there by reduce the losses. He was also of the view that the segmental accounts were drawn withou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant in the transfer pricing report. For the AY 2006-07 also, the appellant had relied on the internal TNMM based on the inbound and outbound segments with Associated Enterprises (AEs) and non AEs comparison. The TPO rejected the method employed by the appellant and used TNMM using external as the most appropriate method. He used Indo-Asia Leisure Services and Shri Raj Travels Tours as the comparables. Exactly on the same facts and circumstances of the appellant s own case, the Hon ble ITAT in the AY 2006-07 has held that the internal TNMM should be used in this case. The relevant portion of the Hon ble ITAT decision in ITA No.-5534/Del/2010 dated 08.07.2011 is reproduced below:- 6. We have considered the facts of the case and submissions made before us. On the basis of the same, the first question which requires decision according to us is whether, the AO was justified in taking recourse to external comparables when internal comparables were available? 6.1 .. Therefore, it is held that in the first instance, the attempt should be made to determine arm s length price of controlled transactions by comparing the same with internal uncontrolled transactions undertaken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly succeeding assessment year. Respectfully following the order of the Hon ble ITAT, the segmental accounts as presented by the appellant is examined. For the sake of convenience, the same is reproduced below:- The operating margin/loss earned/incurred by the appellant from transactions undertaken with associated enterprises in the outbound segment is higher (loss is lower) than the transactions undertaken with the third parties. Further, the price charged in inbound segment falls within the +/-5% range of the price charges in uncontrolled segment. In view thereof, it is submitted by the appellant that the international transactions undertaken by the appellant satisfied the arm s length principle, even if TNMM is to be applied as the most appropriate method. The appellant has explained how these segments are created and the costs are allocated. The audited account does not provide the segmental results as it is not applicable as per the accounting standards. However, that does not invalidate the segmental accounts prepared by the appellant in the TP study. As per the submission of the appellant, it is a scientific way of maintaining the accounts with the help of IT Tool ..... X X X X Extracts X X X X X X X X Extracts X X X X
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