Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2017 (12) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (12) TMI 1423 - AT - Income TaxTPA - rejection of aggregation approach adopted by the assessee for benchmarking its international transactions in the manufacturing activities - Held that:- Where various activities were so interlinked to the export of manufactured IC engines, then the said international transactions undertaken by the assessee for the year under consideration need to be aggregated for undertaking benchmarking analysis applying TNNM method. The Tribunal in this regard placed reliance on the principles laid down by the Hon’ble High Court of Delhi in Sony Ericsson Mobile Communications India Pvt. Ltd. Vs. CIT (2015 (3) TMI 580 - DELHI HIGH COURT ). Following the same principle and where the assessee was engaged in similar activity of manufacturing, we hold that various activities need to be aggregated. Accordingly, we direct so. Applying the TNNM method - whether the margins earned by the assessee from exports to associated enterprises is to be compared with margins earned from sales in domestic market or the same have to be compared with external comparables? - Held that:- Applying the said proposition laid down by the Hon’ble High Court of Delhi in Sony Ericsson Mobile Communications India Pvt. Ltd. Vs. CIT (supra), we hold that accepting the aggregation approach of the assessee of its transactions under the manufacturing activity, we hold that while applying TNNM method, the margins of assessee company are to be compared with the margins of external comparables. However, since the TPO had not verified this factum of comparison with external comparables, we direct the Assessing Officer / TPO to consider the case of assessee and determine the arm's length price and re-compute adjustment, if any, in the hands of assessee on account of international transactions. It may be pointed herein itself that the adjustments were made in the hands of assessee in HHP division and no adjustment was made in LHP division. Approach adopted by the TPO in application of net profit to cost as PLI - Held that:- We direct the Assessing Officer that while determining the PLI to adopt net profit to sales in order to benchmark the international transactions. Benefit of variation / reduction of 5% from the arithmetic mean is now decided against the assessee by the Special Bench of Delhi Tribunal in IHG IT Services (India) (P.) Ltd. Vs. ITO (2013 (5) TMI 309 - ITAT DELHI ), wherein it has been held that the benefit of 5% tolerance margin is available only when variation between arm's length price as determined under section 92C(1) of the Act and price at which international transactions has actually been undertaken does not exceed the said tolerance margin. Accordingly, we hold so. Re-working of deduction under section 80IB - Held that:- As in assessee's own case authorities below in allocating head office expenses, directors’ salary, etc. to the Daman unit and thus, upheld the re-computation of deduction under section 80IB of the Act. Disallowance of expenses under section 14A - Held that:- As the year of appeal being assessment year 2007-08 i.e. the year in which provisions of Rule 8D of the Income Tax Rules, 1962 were not applicable, we restrict the disallowance to ₹ 2 lakhs
|