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2011 (9) TMI 477 - AT - Income TaxDeduction from export turnover under 10A - lease line charges relatable to the STP unit of the appellant - Held That:- In view of Patni Telecom (2008 (1) TMI 452 - ITAT HYDERABAD-A), internet service provider charges and traveling expenses on development of software outside India cannot be excluded from the export turnover, while computing the deduction u/s 10A. Similar view was in case of Gem Plus Jewellery India Ltd (2010 - TMI - 76903 - BOMBAY HIGH COURT ). Transfer Price Adjustments - Assessee imported goods from its holding Co. performed spares replacement services and exported back - TNMM method was followed as the basis of price fixation and selected logistic companines as comparable - Revenue treated the assessee as dealer and adopted Resale Price Method(RPM) - Held That:- We are not able to agree with this finding of the TPO. A trader is a one who purchases the goods by transfer of ownership over the goods and is free to fix the re-sale price and also is free to choose the customers to whom he would sell the goods.In the given case assessee is becoming the owner of the goods imported, but, by virtue of the product replacement services agreement, he has no right to fix the resale price or to choose the customer to whom the products are to be sold. Assessee is only a custodian of the goods imported till they are delivered to the client or customer of its parent company on its directions. When assesee is not a trader RPM cannot be adopted. The assessee has adopted the transactional net margin method, as the most appropriate method as seen above. - The other methods prescribed by Rules are not applicable to the facts of the case before and therefore, the TNMM method is the most appropriate method for computing the ALP relating to the international transactions of the assessee with its associated enterprise. Selection of Comparables - As already brought out by the counsel for the assessee the assets employed and the risk undertaken by the assessee are nil. All these factors are to be considered while selecting the comparables, but the TPO has not considered these aspects before rejecting the comparables selected by the assessee. As regards the comparables selected by the TPO, as rightly pointed out by the counsel for the assessee, three of these comparables except Iris Computers are involved in trading and manufacturing activities and the segmental break up is not given. - While accepting the contention of the assessee, matter remanded back to AO.
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