TMI Blog2016 (4) TMI 1416X X X X Extracts X X X X X X X X Extracts X X X X ..... the margin of the comparable has to be correctly adopted and adjustment on account of depreciation is also justified if excess/lesser depreciation is charged by the assessee because of adopting a different method of charging depreciation as compared to method of charging depreciation by the comparables. But for factual verification of the correct margin of two companies i.e. Priya International Ltd. and Access Global Solutions Ltd. and adjustment required on account of depreciation, the matter is restored back to Assessing Officer/TPO. Needless to say, before passing the order, adequate opportunity of being heard should be provided to the assessee. Disallowance of expatriate cost - HELD THAT:- A clear finding is given by DRP that the liability has been imposed by the HO and the assessee company has agreed to discharge this liability because of non business consideration and learned AR of the assessee could not controvert this categorical finding of DRP. Regarding the argument of commercial expediency, we find that although this contention was raised but the AR of the assessee could not establish the commercial expediency for discharging this liability of the HO and hence, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion contained in sec. 92CA (1) of the Act. (2) The fresh comparable search undertaken by the TPO is bad in law (a) The AO/TPO erred on facts and in law in conducting a fresh benchmarking analysis using non contemporaneous data and substituting the appellant s analysis with fresh benchmarking analysis on his own conjectures and surmises. Thus the appellant prays that the fresh benchmarking analysis conducted by the TPO is liable to be quashed. (b) On the facts and in the circumstances of the case and in law, the TPO erred in not demonstrating that the motive of the appellant was to shift profits outside of India by manipulating the prices charged in its international transactions which are a pre-requisite condition to make any adjustment under the provisions of Chapter X of the Act. (3) Comparability Analysis adopted by the TPO for determination of arm s length price (a) The AO/TPO grossly erred on facts in benchmarking the transactions of the captive marketing support services of the appellant with companies operating as fully fledged entrepreneurs without considering the differences in the functions performed, assets employed and risk undertaken by the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tic mean The AO/TPO erred in law in not granting the benefits of proviso to section 92C(2) of the Act available to the appellant. 3. It was submitted by the learned AR of the assessee that Ground No. 1 is not pressed and Ground No. 6 is to be decided against the assessee in view of insertion of section 2A in section 90 with retrospective effect from 01.04.2002. Accordingly, Ground Nos. 1 and 6 are rejected. Regarding Grounds Nos. 2 to 5, he submitted that the grievances of the assessee will be taken care of if three aspects of the matter are considered and decided. First aspect as per him is exclusion of one comparable out of five comparables selected by the TPO i.e. ICC International Agencies Ltd. (Seg.). In support of this contention, he submitted that as per the tribunal order rendered in the case of Logica (P) Ltd. vs. ACIT as reported in 36 Taxman.com 374 (Bangalore) and Autodesk India Pvt. Ltd. vs. DCIT as reported in TS-502-ITAT-2015(Bang)-TP, copy submitted, it was held by the tribunal that this company is functionally dissimilar. He further submitted that the function of the present assessee and these two companies are similar and therefore, following these two tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill be 14.00% before adjustment of depreciation and 7.98 % after adjustment of depreciation as against the margin reported by the assessee company at 7.29% and since it is within 5% range, no TP adjustment is called for. 7. As against this, learned DR of the revenue submitted that regarding exclusion of one comparable i.e. ICC International Agencies Ltd. (Seg.), she relies on the order of Assessing Officer/TPO. Regarding rectification in operating margins of two comparables and adjustment on account of depreciation, she submitted that the matter may be restored to Assessing Officer/TPO for factual verifications. 8. In the rejoinder, it was submitted by the learned AR of the assessee that he has no objection to restoring the matter back to Assessing Officer/TPO for factual verifications but the issues on principle should be decided by the tribunal. 9. We have considered the rival submissions. Regarding the first aspect i.e. exclusion of one comparable i.e. ICC International Agencies Ltd. (Seg.), we find that in the case of Logica (P) Ltd. vs. ACIT (Supra), that assessee company was engaged in the business of rendering software development services and support services to it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is charged by the assessee because of adopting a different method of charging depreciation as compared to method of charging depreciation by the comparables. But for factual verification of the correct margin of two companies i.e. Priya International Ltd. and Access Global Solutions Ltd. and adjustment required on account of depreciation, the matter is restored back to Assessing Officer/TPO. Needless to say, before passing the order, adequate opportunity of being heard should be provided to the assessee. Grounds Nos. 2 to 5 are allowed for statistical purposes. 12. Ground No. 7 is as under:- (7) Disallowance of expatriate cost (a) On the facts and in the circumstances of the case, the AO erred in making disallowance of ₹ 13,512,070/- incurred towards expatriate costs, without appreciating the fact that the said expatriate costs are incurred in relation to the services rendered by expatriate employees. (b) Without prejudice to the above, on the facts and in the circumstances of the case, the AO has erred in not excluding the aforesaid expatriate cost from the cost base of the appellant, which was considered by the TPO for determining the arm s length margin. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we find that although this contention was raised but the AR of the assessee could not establish the commercial expediency for discharging this liability of the HO and hence, this contention and reliance on the judgment of Hon ble apex court rendered in the case of S. A. Builders (Supra) are without any merit since commercial expediency is not established. Regarding the alternative plea of exclusion from cost for TP study also, we find no infirmity in the order of DRP. Accordingly, this ground is also rejected. 17. Ground No. 8 is as under:- (8) Disallowance of creditor s outstanding balance (a) On the facts and in the circumstances of the case, the AO has erred in making disallowance of ₹ 749,172/- being part of the total outstanding balance in respect of one of the appellant s creditor, namely Visualnet India Pvt. Ltd., considering the same as discrepancy. (b) Without prejudice to the above, on the facts and in the circumstances of the case, even if the AO is justified in making disallowance for mismatch in the outstanding balance of Visualnet India Pvt. Ltd., the mismatch amount should be ₹ 127,603/- instead of ₹ 749,172/-. (c) Without prejudice t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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