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2013 (8) TMI 281 - AT - Income TaxTransfer pricing Adjustment u/s 92CA - TPO made adjustment as per Tribunal's order - Held that:- on a careful perusal of the order of the TPO giving effect to the directions contained in the earlier order of this Bench, it is observed that there were variations and total inconsistencies while implementing the directions of the earlier Bench - TPO was in presumption that the earlier Bench had directed to reduce sale return only while calculating CAGR and debtors without appreciating the fact that the earlier Bench had categorically held that those sales did not materialize and, thus, should be reduced from sales - TPO has arrived at the operating costs for the previous years following a new method, a clear deviation from the original order passed on 30.10.2009 and has adopted a totally a different method of calculation of cost by deducting the marketing expenses from the total cost as the marketing division was transferred to TIPL and it does not exist on the date of valuation - TPO adopted corrected method in estimation of future cash flows except that the revenues for the AY 2006-07 has to be considered and is to be taken as the base year for future projection of revenue - Suitable directions have been issued in respect of revenues only and not for the costs. The TPO had, thus, erred in mentioning that there were no specific directions given with respect to the costs of the previous years - The TPO has also erred in mentioning that current year data has to be considered for the projection of future earnings. In fact, specific direction was given, as can be seen from the earlier order that revenues for the current year i.e., 2006-07 has to be considered and is to be taken as the base year for future projections - Decided in favour of assessee. TPO has erred in mentioning that the Marketing Division was non-existence on the date of valuation. The TPO has failed, perhaps, to properly understand that TSPL transferred intangible properties TSFL, Dubai and its marketing division to Tally India Pvt. Ltd and whole subject matter of this valuation is this transfer and the marketing division was in existence before the date of transfer. The transfer of assets and the marketing division is done simultaneously and together. Therefore at the time of transfer of asset, the marketing division was not transferred and it is wrong to assume that the transfer of marketing division has happened prior to the sale of assets - TPO cannot change the method of calculation of cost which was accepted by the earlier Bench as mentioned in the original order and also as discussed above, the assumption of TPO now as different from the original order of the TPO that Marketing division was transferred prior to transfer of assets as the fact remains that both the transfers have taken place simultaneously on 31-01- 2006. TPO has also erred in taking the costs for only 10 months whereas the revenues have been for 12 months. When the revenues are taken for 12 months, the costs have also to be taken for 12 months and not for 10 months. Therefore, the TPO is directed to adopt the costs for 12 months for arriving at CAGR of the cost for the year 2005-06. The TPO has clearly erred in arriving at the revenues for the FY 2004-05 relates to AY 2005-06. As per Step 1, the turnover for the FY 2004-05 relating to FY 2005-06 is ₹ 72,20,84,213/- whereas the TPO has arrived at the turnover at ₹ 198,15,17,988/- which is totally wrong. In the original order passed by TPO, the turnover arrived at Step 1 has been taken in Step 4 also and no specific directions were given by the earlier Bench for arriving at these revenues in this step. The TPO has to reduce sales returns against sales in all the steps and cannot arbitrarily include in some steps. In the earlier order, we had not given specific directions as we found that in the original TP order the revenue are same in Step I and Step 4. - AO directed to adopt the revised/modified transfer pricing adjustment which will be worked out by the TPO - Decided partly in favor of assessee.
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