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2015 (4) TMI 1139 - AT - Income TaxAddition made of the price of the international transaction - Held that:- As during the course of the appellate proceedings before the ld CIT(A), the assessee had filed a copy of the, transfer pricing audit conducted by the Internal Revenue Service, Department of the Treasury US. The assessee was audited by Internal Revenue Service - International Division US for the calendar years 2003, 2004 and 2005. The examination carried out by the international division of the Internal Revenue Service, indicated a downward adjustment to income of one its foreign subsidiaries in Sri Lanka, resulting in an increase of income in the U.S. No adjustments were carried out to any transaction between the assessee India Co. and the parent company. TPO is of the opinion that reason of loss are on other segments and not the content segment which is not correct because in the calendar 2002 the parent company had suffered a total loss of USD (5,165,000), which included loss from content segment of USD (2,996,900)and loss from system and training segment of USD (2,169,000). So, it is an incorrect observation of the TPO that the reasons for the loss of the parent company are on account of segments and not the content segment. In view of the precedents cited in the impugned order, we find that the ld CIT(A) rightly observed that the assessee was justified in reducing idle fixed expenses of ₹ 3,87,30,000/- from the total operating expenses and thereby arriving at net operating expenses of ₹ 18,55,63,560/-. Based on such net operating expenses, the net operating profit margin works out to ₹ 1,80,16,160/-, resulting in NCP margin percentage of 9.71%. The arithmetical mean of the weighted averages of the comparable companies as compiled by the assessee and as also referred to and accepted by the TPO in para 5. 1 of his order is 10.12%. Since the assessee’s operating margins falls within (+1-) 5% of the arithmetical mean of comparable prices, Ld. CIT(A) has rightly held that the assessee’s International Transactions with its associated enterprises during the year to be at Arm's Length. Consequently the addition of ₹ 4,34,12,348/- made to the price of international transaction was directed to be deleted by the ld CIT(A). For the reasons enumerated above by the ld CIT(A), she rightly deleted the addition made by the Assessing Officer on account of difference in arm's length price of ₹ 4,34,12,348/-. - Decided in favour of assessee
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