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2014 (9) TMI 117 - AT - Income TaxTransfer pricing Adjustment - determination of ALP u/s 92CA(6) - reduction of Project Management Cost – discounting factors - Held that:- The assessee had determined its ALP by reducing its gross margin ratio on cost of production from 69.65% to 6.97% by loading discounting factors with respect to long term contract 20.90%, technology transfer 10.45%, Project Management Cost 27.86% & Credit and Credit Risks 3.48% - TPO rejected these factors however, accepted the project management cost factor at 14.14% - In arriving at 14.14% discounting factors on project management cost, the TPO accepted the same method adopted by the assessee however, shifted the computation by adopting total value of sales of unrelated party with the related parties - This stand of the TPO with respect to the discounting factors on project management cost is reasonable, because when the discounting factors are considered for transactions with unrelated party, then the data with respect to unrelated party are to be taken into account for arriving at the discounting factors - TPO had further rejected the discounting factors with respect to credit risks because the same was considered for arriving at the discount factors with respect to project management cost - TPO had not duly considered the discounting factors with respect to long term contract and technology transfers, which was adopted by the assessee at 20.90% & 10.45% respectively. There was no merit in the order of the CIT (A), there were no discussions on the computation made by the appellant or by the TPO in his order - the discounting factors adopted considered by the assessee appears to be relevant, computations with respect to the aforesaid discounting factors are not explained and they also do not emerge from the orders of the Revenue or from the submissions and paper book submitted by the assessee - AO to adapt the discounting factor of 15% for long term contract, and 6% for technology transfer being 70% & 60% approximately as that was accepted by the assessee – the AO is directed to arrive at the ALP based on the acceptable discount factors as given in the table – the method of computation to be adopted for determining the ALP modified, and also uphold the inclusion of the salary paid to technical persons by the appellant in computing the direct cost – Decided partly in favour of revenue.
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