TMI Blog2011 (6) TMI 154X X X X Extracts X X X X X X X X Extracts X X X X ..... Industries Ltd. v. CIT (1979 -TMI - 36941 - GUJARAT High Court) - Order of CIT(A) upheld - decided in favor of assessee. - 4001 (DELHI) OF 2009 - - - Dated:- 17-6-2011 - G.E. VEERABHADRAPPA, RAJPAL YADAV, JJ. Sanjay Puri for the Appellant. Ajay Vohra, Neeraj Jain, Ms. P. Kapoor and Pallav Rajbanshi for the Respondent. ORDER Rajpal Yadav, Judicial Member. The revenue is in appeal before us against the order of Learned CIT (Appeals) dated 28-7-2009 passed for the assessment year 2004-05. In the first ground of appeal, revenue has pleaded that Learned CIT (Appeals) has erred in deleting the additions made by the Assessing Officer on the recommendations made by the learned TPO for adjustment in arm's length price on the international transactions carried out by the assessee with its associate enterprises. 2. The brief facts of the case are that the assessee is a 100 per cent subsidiary of Birla Soft Enterprises, which is a 100 per cent subsidiary of Birla Soft Inc. US. It is engaged in the business of software development and related services. It has filed its return of income on 1-11-2004 declaring an income of Rs. 7,82,54,384. The software related business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il Chennai STP -21.98% 14.01% 2,68,45,727 Total 4,95,51,723 4. On appeal, Learned CIT (Appeals) has reappreciated the controversy and arrived at a conclusion that arithmetic mean of profit level indicator of the comparable selected by the Assessing Officer is 14.01 per cent whereas assessee has disclosed arithmetic mean of its international transaction with associate enterprises carried out in all the three STP units at 10.91 per cent. This operating profit disclosed by the assessee is within the tolerable band provided in the proviso appended to section 92C(2) and, therefore, no adjustment is required. 5. With the assistance of learned representatives, we have gone through the record carefully. The dispute between the parties for determination of ALP with respect to international transaction is in a very narrow compass. In order to examine the issue, whether any adjustment is required to be made in the ALP disclosed by the assessee relating to its international transaction with its associate enterprises, the first area of dispute which could arise between the parties is in respect of most appropriate method requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls facts which could have an influence on the determination of transfer price in relation to transaction of comparison. Thus the main section used the expression "shall" which make it mandatory to first use the current year data. If certain other circumstances reveals an influence on the determination of transfer pricing in relation to the transaction being compared than other datas for period not more than two years prior to such financial year may be used. Thus ld. CIT(A) has rightly upheld the view point of TPO for using current year data. 9. The next area of dispute relates to selection of comparables who have uncontrolled transactions of similar nature. The assessee has selected 24 companies in its TP study report. Learned TPO has rejected 9 comparables from the list. Learned representatives have not advanced detailed argument on selection of comparables. The dispute raised before us at the time of hearing was whether Assessing Officer is justified in considering the each STP Unit as a stand alone unit for computing the ALP. In other words, whether result of all the STP units has to be considered for working out the operating profit. The learned counsel for the assessee subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he proviso to section 92C(2) of the Act and, therefore, no adjustment is required. Learned TPO has recommended the adjustment by ignoring the result of Noida STP Unit 2. We have noticed this working in paragraph No. 3 extracted supra. 11. Learned First Appellate Authority did not accept the approach of TPO for segregating the margin earned by the assessee in its various STP units. The reasons for not concurring with the TPO are that the assessee had provided software development services, such as, software development services, software maintenance and repair services, quality testing services from its three units. It is an identical services. 12. There is no significant functional difference in the software development and maintenance services to related and unrelated values. The services rendered by the STP Unit were rendered to the same AEs of the assessee, namely, Birla Soft Inc. US and Birla Soft UK on continuing basis. 13. The terms and conditions for rendering such services by each of STP Unit was governed by one single agreement entered into between Birla Soft India and Birla Soft Inc. US. The learned TPO has assumed that functions, assets and risk undertaken by each ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i/06. Taking into consideration the order of the ITAT, in assessment year 2003-04, we do not see any reason to interfere in the order of the Learned CIT (Appeals). 17. In ground No. 3, grievance of the revenue is that Learned CIT (Appeals) has erred in deleting the addition of Rs. 19,26,120. The brief facts of the case are that on perusal of the tax audit report, Assessing Officer found that at Clause No. 22B, the auditor has stated that assessee has made prior period expenses of Rs. 19,26,120. It claims the deduction of this amount in the present assessment year. He directed the assessee to explain as to why these amounts be not disallowed. In response to the query of the Assessing Officer, assessee has made the submissions vide letter dated 15-12-2006. It reads as under : "Every employer is obligated to pay the payroll taxes on monthly basis which is calculated as a per cent on the monthly wages. Birlasoft Australia branch has complied with this provision and has paid the same on monthly basis. On an annual basis, the Branch is further obligated to reconcile the annual wages and pay the differential or is entitled to receive the tax back if paid extra. The accounting period f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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