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2011 (3) TMI 560 - AT - Income TaxArms length price - International transaction - Reference to TPO - assessee submitted that submitted that as far as sec.92C(3) of the Act, is concerned the AO can refer or determine the price only under the circumstances enumerated in Clause(a) to (d) of sec.92C and in all other cases, the value of the international transaction should be accepted without further scrutiny - Held that:- AO is not required to demonstrate the existence of the circumstances set out in clauses (a) to (d) of sec.92C(3) before referring the case of the assessee to the TPO for determining the ALP under sec.92CA(1). Use of multiple year data for determination of ALP - assessee submitted that the use of multiple year data generally captures the market cycles and reduces the likelihood that the financial results of an anomalous year will distort the Arm’s Length ranges. - assessee’s business cycle, industry profile and economic conditions, a two to three year data is appropriate rather than the use of a single year data. - Held that:- the fluctuation caused by business/economic/product life cycle would in any way affect the pricing pattern of the services of the relevant financial year. In the absence of any cogent and reasonable reasons given by the assessee for justification of use of multiple year data, except placing reliance upon the OECD guidelines and also the proviso to Rule 10B(4) of the IT Act, we do not see any reason to interfere with the order of CIT(A). The OECD guidelines are not of binding nature and even the provisions to Rule 10B(4) only provides that any subsequent year data cannot be considered. Exclusion of non operating income - Held that:- for arriving at the net margin of operating income, as rightly stated by the counsel for the assessee, that only operating income and operating expenses for the relevant business activity of the assessee are to be taken into consideration. - inclusion of nonoperating income and non-exclusion of the non-operating expenses would definitely affect the net margin of the operating profits of the comparable company. The comparison has to be between the likes and on the equitable grounds of the indicators of the comparison and therefore, only the income derived from the operation of the said activity are to be considered.
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