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2018 (5) TMI 946 - AT - Income TaxAdjustment u/s 92CA - addition on account of adjustments determined by the TPO and treated as cumulative adjustment - benchmarking - commission earned - Held that:- A perusal of the order of the TPO shows that the TPO has, in fact, reorganized the business of the assessee thereby putting himself in the shoes of the assessee and deciding which expenditure should be incurred by the assessee for doing its business. The DRP fell into same error by affirming the findings of the TPO. In so far as the commission earned is concerned, we find that in the earlier years, the rate of commission was 2% which came down to 1% from 2008. This means that since 2008 and upto 2012, the Revenue has accepted the charging of commission @1%. It is only in this year the Revenue has changed its stand and questioned the rate of commission @ 1% and changed it to 4%. This shows that the TPO has compared the rate of commission charged by the assessee with the rate of commission charged by the assessee to its other AEs. This is clearly barred by the provisions of section 92F(ii) r.w.s. 92 of the Act. What the TPO has done is he has compared controlled transaction with other controlled transaction whereas he should have compared the controlled transaction with other uncontrolled transactions. Action of the Assessing Officer is not as per the provisions of law because section 92F(ii) defines ALP as a price which is applied or proposed to be applied in a transaction between persons other than associated enterprises in uncontrolled conditions. Considering all no merit in the adjustments made by the TPO/DRP. We, therefore, set aside the findings of the DRP and direct the Assessing Officer to delete the addition on account of adjustments determined by the TPO and treated as cumulative adjustment u/s 92CA. Assessee has bench marked the transaction by using the combined transaction approach by applying TNMM as against the approach of TPO in bench marking the transaction separately. The bench marking done by the assessee is correct and the approach of the TPO is not sustainable.
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