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2016 (7) TMI 15 - AT - Income TaxTransfer pricing adjustment - valid remuneration model for benchmarking the TP adjustment - cost plus form of remuneration v/s commission based remuneration - Held that:- As relying on assessee’s own case qua the assessment years 2006- 07 and 2007-08 and case from Li & Fung India Pvt. Ltd. vs. DCIT [2011 (9) TMI 204 - ITAT, New Delhi] wherein remuneration model of markup of 5% on the operation cost without considering the value of the cost procured by the AE directly from the third party vendors in India has been held as a valid remuneration model for benchmarking the TP adjustment. So, we are of the considered view that the assessee is not into buy and sell rather it is a facilitator/service provider and its compensation model at ALP would not be commission of FOB cost of goods sourced from India, rather assessee company is entitled to cost plus remuneration and not a commission based remuneration. Bench marking the international transaction by using appropriate comparables - Held that:- TPO has not made a fair analysis of the comparables, though chosen by the assessee in its TP study for the AY 2007-08, rather relied upon his own finding for the earlier years which have undisputedly been set aside by the Tribunal. So, we are of the further opinion that the ld. TPO to benchmark international transactions afresh by examining the suitable comparables by providing opportunity of being heard to the assessee. So, file is ordered to be restored to the TPO to benchmark the international transactions in the light of the observations made hereinbefore. Disallowance of rent expenses being conversion charges paid to the Municipal Corporation of Delhi (MCD) - Held that:- DRP/AO have erred in disallowing the expenses of conversion charges claimed by the assessee and then added the same to the total income of the assessee company which are not to be considered as capital expenditure as the same have been expended for business purpose and without conversion of the property, the business would not have been started even and as such, allowable for deduction
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