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2019 (6) TMI 1577 - AT - Income TaxTP Adjustment - TPO proceeded to amend the list of comparables and finally came with the list whose operating margin had a mean of 20.59% - assessee in this regard submitted that it has a margin of 19.80% on its exports - TPO held that assessee's contention to consider the export segment is rejected and entity level margins of the assessee was considered to find the arm's-length price of international transaction - HELD THAT:- The only objection was that segmental accounts were not audited and that proper allocation keys were not submitted. However this has been duly countered by the learned counsel of the assessee by submitting that allocating the common expenses to the export segment by whatever key the result would compare favourably with the arithmetic mean of the operating margin of the comparable's selected by the transfer pricing officer. There is a marked distinction between supporting order of the AO/TPO by the Departmental Representative on one hand and finding flaws in the order of the AO/TPO in an attempt to show that the AO/TPO failed to do what was required to be done by him. In our considered opinion if the learned Departmental Representative is allowed to fill in the gaps left by the AO/TPO it would amount to conferring the jurisdiction of the CIT u/s 263 to the Departmental Representative, which is not permitted by the statute. Let us take another situation. Suppose a particular deduction is permissible on the cumulative satisfaction of three conditions. The AO examines the case and finds the very first condition as tacking. Without examining the fulfillment or otherwise of the other two conditions, he rejects the claim, in that case if such first requirement is subsequently found to be fulfilled in the appellate proceedings, the Departmental Representative can very well point out to the tribunal that the other two conditions were a/so not fulfilled. As held by the authorities below that proper allocation keys of common expenses between export and other segment have not been provided. In this connection assessee has submitted that if the common expenses are allocated by applying any of the keys the operating margin of the export segment would compare favourably with the operating margin of the comparables. This proposition has not at all been rebutted by the authorities below. The learned departmental representative also could not dispute the above proposition. However learned departmental representative has tried to make out a new case by making a submission that the matter may be set aside to TP. Authorities below objected to comparability of assessee's export segment with the comparable selected by the TPO only on account of their observations regarding absence of proper allocation key. It was never their case that there is lack of comparability. Learned departmental representative is well within his rights on supporting the order's of the authorities below. However he cannot argue that the transfer pricing officers action is incomplete and therefore the issue needs to be set aside so that the transfer pricing officer can be given a second innings. Such a view was rejected by the ITAT in the case of Maersk Global Services Centre (I) P. Ltd. [2014 (8) TMI 1099 - BOMBAY HIGH COURT] above, which was duly upheld by the honourable jurisdictional High Court. We find cogency in assessee's submission that the operating margin of the export segment of the assessee can be compared with the profit margin of the comparables selected by the transfer pricing officer by any allocation key selected. The TPO is directed to examine the veracity of this submission and delete the adjustment on account of arm's length price, if the result compares favourably. We find cogency in assessee's submission that the operating margin of the export segment of the assessee can be compared with the profit margin of the comparables selected by the transfer pricing officer by any allocation key selected. The TPO is directed to examine the veracity of this submission and delete the adjustment on account of arm's length price, if the result compares favourably.
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