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2013 (9) TMI 116 - AT - Income TaxDisallowance and adding back of losses of 10A units while computing income - Held that:- AO has considered the correspondence and documents of assessee with STPI and also information sought by AO from Director STPI and has held that both these units are merely an expansion of existing unit and not independent undertakings. Therefore, we consider it prudent to set aside the orders of authorities below and restore the matter to file of AO for the limited purpose to re-examine as to whether Unit Nos. II & III set up by assessee are independent units to the existing undertaking or merely an expansion of the existing undertaking in the light of principles laid down by Co-ordinate Bench decision in the case of Patni Computer Systems Ltd. Versus Deputy Commissioner of Income-tax, Circle-4 [2011 (6) TMI 500 - ITAT PUNE] and also in the light of letters including letter dt. 10.12.2008 issued by Director STPI and also on the basis of such evidences as may be filed by assessee after giving due opportunity of hearing. With these directions, the matter stands restored to AO - Decided in favour of assessee. Transfer pricing adjustment - Held that:- net profit margin is to be considered qua the comparable uncontrolled transaction or number of such uncontrolled transactions. Uncontrolled transaction has been defined in Rule 10A(a) to mean “a transaction between enterprises other than associate enterprises, whether resident or non-resident”. Rule 10B(1)(e) in juxtaposition to Rule 10A(a). The position which emerges is that in applying the TNMM, net profit margin realized from a comparable uncontrolled transaction is to be taken into consideration. The conditions thus envisaged for making a case as comparable for this purpose, should not only be comparable but also have uncontrolled transaction. These twin conditions need to be cumulatively satisfied. If such other case is only comparable but has controlled transaction or vice-versa, it shall fall outside the ambit of list of comparable cases - TPO suggested to make adjustment only by comparing the rate of commission paid to AE on First Notice and no case has been brought on record that commission paid by assessee to AE @ 15% is excessive. Further we observe that Ld. CIT(A) has held that similar issue was also considered in the preceding assessment year 2004-05 and similar adjustment made were not agreed to and it was held that assessee’s transaction with AE in respect of commission was at Arm’s Length - Decided in favour of assessee.
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