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2011 (3) TMI 483 - AT - Income TaxInclusion of Interest income for the purpose of calculation of Arm’s length price (ALP) – Held that: - Interest income is not a relevant receipt which has any influence on the operating income of the assessee for working out the ALP. Therefore, this receipt has rightly been excluded in both the assessment years. Credit of expenditure incurred - The Telephone Department has raised a demand upon the assessee which was disputed by it in a telephone adalat but ultimately it has to pay the amount – Held that: - In computing the ALP, the expenses in the nature of abnormal items are not to be looked into. This expenditure is not of a routine nature. It is not ascertainable from the record, whether it is for actual user of the telephone or for some other reasons - once it is considered that this amount represents expenses of personal nature then it may not have any bearing on the international transaction. CIT(A) has rightly excluded this amount from the operating cost. Expenses in relation to branches closed - cost of closure – Held that: - Assessee has been receiving the certain charges at cost plus 10%. In such circumstances, this type of receipts would always be considered in the operating expenses. - cost of closure is not to be excluded from computing the operating expenses. Adjustment on account of risk – Held that: - assessee failed to file the details exhibiting risk born by comparables. - In the absence of that comparability, it is difficult to make adjustment. - The assessee ought to have demonstrated this factor before the learned TPO as well as before the Learned CIT(Appeals). - it is difficult to give any benefit on that account. Adjustment on account of global recession – Held that:- It may be a corroborative factor for determination of ALP in the case of assessee, but it is difficult to work out the exact influence of the market condition in the profit making of the assessee. TPO has considered the results of the comparable cases and thereafter recommended adjustment, therefore, we do not deem it appropriate to make any ad hoc adjustment on the basis of this argument at this stage. Variation within the limit of +/- 5% - held that: - the transfer price shown by the assessee was not to be disturbed if it was within +/- 5% mean ALP range than the arm’s length price determined by the Assessing Officer based on the arithmetical mean of the prices. - this option is available to the assessee but it is available only when assessee is computing the ALP and not when the A.O./PTO is computing the ALP.
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