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2018 (12) TMI 1133 - AT - Income TaxUpward adjustment on arm’s length price - selection of MAM - assessee objected that method adopted by ld. Commissioner are not in sync with reality - cost plus method (CPM) v/s Transactional Net Margin Method (TNMM) - Held that:- The stand of the DR that the assessee has selected TNMM as a most appropriate method (MAM) by using terminology, in his TP-Study Report, as PBIT/Sales to compute the ALP and the assessee cannot resort to change his method at the appellate stage, is not acceptable for the reasons given above. Such a contention cannot be upheld because it is found on the facts of the case that if a particular method will not result into proper determination of ALP, the TPO or the Appellate Authorities can very well hold that why a particular method can be applied for getting proper determination of ALP, or the assessee can demonstrate the particular method to justify its ALP. The ultimate aim of the TPO to examine whether the price or the margin arising from an international transaction with a related party is at ALP or not. The determination of the ALP is the key factor for which the MAM is to be followed. Therefore, if at any stage of the proceedings, it is found that by adopting one of the prescribed method other than the one chosen earlier, the ALP can be determined, the TPO as well as the CIT(A) should take into consideration such a plea before them, provided, it is demonstrated as to why the change in the method will produce better or more appropriate ALP on facts of the case. Therefore, we reject the contention of the ld. DR and also the observation of the TPO that the assessee cannot resort to adopt the Cost Plus Method (CPM) instead of TNMM for its purchase and sale of services. No infirmity in choosing the Cost Plus Method (CPM) by the assessee to determine the arm’s length price (ALP) of sale of services and purchase of services, hence we delete the transfer pricing adjustment - Decided in favour of assessee Disallowance u/s 14A other than what the assessee had suo-moto disallowed - Held that:- As decided in the case of REI Agro Ltd. Vs. DCIT [2013 (9) TMI 156 - ITAT KOLKATA] has held that it is only the investments which yields dividend during the previous year that has to be considered while adopting the average value of investments for the purpose of Rule 8D(2)(ii) & (iii) of the Rules also confirmed by HC [2014 (4) TMI 713 - CALCUTTA HIGH COURT] - Thus we direct the assessing officer to compute the disallowance under rule 8D(2)(ii) and under rule 8D(2)(iii), by taking into account the dividend bearing securities/investments. Therefore, we allow this ground of appeal raised by the assessee for statistical purposes. Additions made with respect to unbilled revenue which is already included in the revenue/income of the company - Held that:- DRP had already given instruction to the Assessing Officer to examine whether the assessee had included unbilled revenue in his turnover and offered for tax or not. We note that the Assessing Officer had not followed the direction of the DRP in right perspective and he did not examine accounts of the assessee to find out whether the assessee had offered the same for taxation or not - direct the AO/TPO to examine the books of accounts of the assessee and if the assessee has included the turnover on accrual basis of accounting and offered for taxation then the addition should not be made or if this unbilled revenue has not been included in the Assessment Year under consideration and has been included in the subsequent Assessment Year, the same fact should also be examined that the assessee has offered for taxation the said unbilled revenue in subsequent year. - Appeal Decided partly in favour of assessee.
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