TMI Blog2010 (4) TMI 840X X X X Extracts X X X X X X X X Extracts X X X X ..... gives lesser figure and then compare this result with the comparable cases, after the comparison he applied the difference only to the international receipts. To our mind that is not the appropriate step permissible in law and the Ld. CIT(A) has rightly appreciated this aspect. Profit is more than the PLI determined by the TPO at 16.34%. Therefore there is no reason to examine the issue on the argument of assessee that TPO has not applied proper comparable while working out this PLI, because that issue will be an academic issue in the present case even if some of the cases are not of comparable then also PLI more than the one adopted by the TPO at 16.34 % canot be take on which is lower than the one shown by the assessee. The CIT(A) has though considered this aspect also before deleting the addition no reason to interfere in it, appeal of the revenue is dismissed - I.T.A No. 3640/Del/07 - - - Dated:- 30-4-2010 - SHRI RAJPAL YADAV, SHRI K.D. RANJAN, JJ. Appellant by: Shri Sanjeev Sharma, DR Respondent by: Dr. Rakesh Gupta ORDER PER RAJPAL YADAV, JM: The revenue is in appeal before us against the order of Ld. CIT (A) dated 30th May 2007 passed for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... International transaction Value of international transaction Proportionate adjustment Arm s length price of international transaction 1. Warranty support services 2,32,37,906 72,95,302 3,05,33,208 2. Commission income 1,47,96,910 46,46,591 1,94,43,501 The Arm s Length Price of the international transaction related to warranty support services has thus been computed at Rs. 3,05,33,208/-. The (+-) range of the Arm s Length Price is Rs. 3,20,59,868/- (+5%) to 2,90,06,547/- (-5%). Since the value of international transaction is Rs. 2,32,37,906/-, which falls outside the (+-5%) tolerance band, the assessee is not entitled to the benefit of proviso to sub-setion (2) to section 92C of the Income Tax Act. The Arm s Length Price of the International transaction related to commission income has thus been computed at Rs. 1,94,43,501/-. The (+-) range of the Arm s Length Price is Rs. 2,04,15,676/- (+5%) to 1,84,71,325/- (-5%). Since the value of international transaction is Rs. 1,47,96,910/-, which falls outside the (+-5%) tolerance band, the assessee is not entitled to the benefit of pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. by the assessee independently, rather all these activities in respect of the goods supplied by the associate enterprises. Thus the activities undertaken by the assessee even domestically are associate enterprises oriented. They have not provided any service to any third party which purchased the equipment from the party other than from associate enterprises. The TPO has adopted TNMM method which is most appropriate method in the present case. The assessee is manned by technical persons. It is doing survey for installation. It supplied technical hands for engineering therefore the TPO has rightly taken into consideration the installation and reengineering receipts while computing the arm s length price determined by the assessee and the one required to be determined after taking into consideration the comparable cases. He further pointed out that international transactions are both sides i.e. income side and expenses side. Referring to page 12 of the paper book he pointed out that certain expenses are related with respect of the material purchased from associate enterprise but supplied to third party. These expenses are related to installation and commission though the expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pward side is in respect of warranty and commission income. He has not made adjustment in the installation and reengineering receipts. If these are not receipts which required to be adjusted then while computing the profit level indicator in the case of assessee the TPO ought to have taken into consideration the two receipts namely warranty service and commission income. While computing the PLI disclosed by the assessee he has considered the four receipts and then worked out the profit level indicator. If these receipts are excluded from the computation then profit margin in respect of the international transaction is 18.98% which is higher than the one determined by the TPO at 16.34%. He emphasised that Ld. TPO has totally failed to construe the transactions of the asseswee, 6. We have duly considered the rival contention and gone through the record carefully. From the perusal of the TPO s order it reveals that he has made adjustment only in respect of warranty receipts and commission income. It is discernable from the finding of his order extracted supra, while computing the profit level indicator of the assessee he took into consideration the installation, commissioning rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own by the assessee he included the domestic receipt which gives lesser figure and then compare this result with the comparable cases, after the comparison he applied the difference only to the international receipts. To our mind that is not the appropriate step permissible in law and the Ld. CIT(A) has rightly appreciated this aspect. The other question is whether these receipts are for the services provided domestically and required to be excluded for the computation of PLI. We find that assessee has demonstrated on the record that there are independent agreement. Most of the agreements were entered with the customer after expiry of warranty period. We have specifically gone through page 20 of the paper book wherein it is evident that equipment supplied to 40 customer by the AE, only three has availed installation service from the assessee. The other corroborative circumstance in order to construe these transactions as related to domestic transaction is the order of the TPO itself wherein he has not made any adjustment to these receipts. Since the profit level indicator shown by the assessee on these two services is 18.98% which has been worked out by the assessee as under:- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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