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2013 (9) TMI 304 - AT - Income TaxAdjustment of transfer pricing - ALP - Held that:- appellant company had prima facie demonstrated that its prices are comparable and Arm's length price fixed objectively, honestly and in a bona fide manner as required by statutory regulations. This being directly explained by the appellant and as held by the Delhi Bench of the Income-tax Appellate Tribunal, [Mentor Graphics (Noida) (P) Ltd. (2007 (11) TMI 339 - ITAT DELHI-H )] the same cannot be varied by the Transfer Pricing Officer or the Assessing Officer unless it can be shown that these aspects were not properly examined in the report submitted. Therefore, in the light of above decision of the Delhi Bench of the Tribunal, it is held that the Transfer Pricing Officer or the Assessing Officer should not have rejected the arm's length price determined by the appellant without showing how the pricing worked out by the appellant was incorrect or perverse. In the present case, the appellant was given the financial statements of M/s. Qpro Infotech Ltd. by the TPO with a direction to compare its transactions with that company. The appellant vide its letter dated 19-05-2006 demonstrated that its profit percentage is better than that of M/s. Qpro Infotech Ltd. as of March, 2004. The TPO however, did not accept the same and handed over the financial statements of another company, viz., M/s. New Gen Imaging Systems Pvt. Ltd. and directed the appellant company for comparison. The assessee company, vide its letter dated 06-11-2006 addressed to the TPO, explained that the line of activity of M/s. New Gen. Imaging Systems Pvt. Ltd. was different from them. Therefore, the assessee explained that it was a futile exercise to compare the uncomparables. The TPO however, disregarded these facts and proceeded to hold that the appellant's pricing is lower than the average rate of M/s. New Gen Imaging Systems Pvt. Ltd. and held that the appellant company has lowered its profit margin and has diverted its profit to the parent company. From the material placed on record and on a careful examination of the same, it is found that the learned TPO has erred in attempting to compare the financial statements of the assessee company with those of M/s. New Gen Imaging Systems Pvt. Ltd. because both these companies are uncomparable - TPO is arbitrary in assuming that the appellant has lowered Its profit margin by diverting its profit to the parent company. This assumption is found to be baseless. The TPO's observations with regard to the AE siphoning off the appellant's profits are based merely on surmises and conjectures. Moreover, the transfer pricing provisions, as narrated above under the Income-tax Act, nowhere authorises the TPO to arbitrarily estimate the transfer price. The basis recorded by the TPO is devoid of merits. Therefore, the addition of Rs. 1,58,59,366/- is directed to be deleted - Decided against Revenue.
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