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2011 (5) TMI 222 - AT - Income TaxArm's Length Price - The Ld. CIT(A) has erred in deleting the addition of Rs. 12,37,05,850 made on account of difference of Arm's Length Price - The assessee company is primarily engaged in providing receivable management services to its offshore clients - During the year under consideration, the assessee had undertaken international transactions with its associate enterprises - The AO referred the matter under section 92CA to the Transfer Pricing Officer for determining the arm's length price of the international transactions entered into by the assessee with the associate enterprises - Hence, the issue was decided by the CIT(A) against the assessee in the light of the learned CIT(A)'s order passed in assessment years 2003-04 and 2004-05 which was affirmed by the Tribunal - The CIT(A) observed that there being no change in the facts in the current year vis-à-vis earlier years, he did not interfere with the finding for the earlier years. FAR analysis - Determination of ALP - The Ld. CIT(A) has erred in not affording any opportunity to the TPO before proceeding to compute the margin of the comparables and the assessee." - the contention of the appellant that 'FAR analysis' forms the basic foundation on which the ALP is determined and its importance just cannot be overemphasized - The appellant has been provided full opportunity during the course of appellate proceedings , to present the facts of the case, including FAR analysis and on consideration of same the ALP has been determined in subsequent paras." Whether ALP of international transaction between the assessee and its AE can exceed a total amount of revenue earned from clients by the assessee and its associate enterprises together - he same issue was decided in favour of the assessee in the assessment year 2003-04 by the CIT(A) which was confirmed by the Tribunal and since there was no consequent change in facts of the current year, the CIT(A) held that 1.40% of the revenue to be retained by the associate enterprises is adequate to compensate it for its marketing activities and the assessee is entitled to 98.6% of the amount earned by associated enterprises from independent clients. The learned CIT(A) therefore, restricted the ALP to Rs. 60,32,18,954 being 98.6% of the total revenue of Rs. 61,17,83,929. ALP determined - Benefit of adjustment of 5% - the assessment year under consideration, the benefit of adjustment of 5% has been allowed to the assessee because of the reason that difference between the ALP determined by the learned CIT(A) and the price of international transactions declared by the assessee was within the range of 5% - Since the ALP determined by the CIT(A) is within 5% range of the price declared by the assessee, the benefit of 5% adjustment under Proviso to section 92C(2) has been rightly given by the learned CIT(A) in the current year under consideration - Hence, uphold the order of the CIT(A) on the issue of determination of ALP in the current year under consideration - Thus, the grounds raised by the revenue are rejected.
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