TMI Blog2015 (5) TMI 780X X X X Extracts X X X X X X X X Extracts X X X X ..... Held that:- A perusal of the assessment order shows that the AO grossly erred by wrongly taking the quantity of units purchased and sold as the value of mutual funds. We find that there is no opening and closing balance. What the AO has taken is the quantity of units purchased and units sold for the purpose of making disallowance u/s 14A of the Act. Since, the disallowance is based on factual errors, we direct the AO to delete the addition of ₹ 19,326/- - Decided in favour of assessee. Levy of interest u/s 234B and 234C - Held that:- The levy of interest is mandatory though consequential. We accordingly direct the AO to charge interest u/s 243C and 234B of the Act. - Decided against assessee. - I.T.A. No.1315/Mum/2014 - - - Dated:- 6-2-2015 - SHRI JOGINDER SINGH AND N. K. BILLAIYA, JJ. For The Assessee : Shri Arvind Sonde For The Revenue : Shri N K Chand ORDER PER N. K. BILLAIYA (AM) This appeal by the assessee is preferred against the assessment order dated 31.1.2014 made under section 143(3) r.w.s.145C(13) of the Income Tax Act, 1961 (the Act). 2. The assessee has raised in all 13 grounds of appeal. Ground Nos.1 to 6 relate to the transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional Net Margin Method (TNMM) with Operating Profit to Total cost as Profit Level Indicator. The assessee operating profit to total cost is shown at 17.11%. The assessee has used 14 comparable companies to justify its ALP. The average of the comparables taken by the assessee come to 13.54%. The assessee was asked to submit margins of the comparables using the data of FY 2008-09. The assessee submitted single year data. The average mean of comparables given at 14.93%. As the assessee has shown 17.11%. It was claimed by the assessee that its international transactions with its AE is at ALP. 3. The TPO conducted his own search. The search result gave the set of 24 companies. The arithmetic mean of these companies came at 29.77%. The TPO issued a show cause notice to the assessee asking the assessee to explain as to why the arithmetic mean of 29.77% should not be used for computing the arm s length margin. The assessee filed a detailed reply dated 24.12.2012 objecting the inclusion of the companies in the list of comparables pointing out why each company should not be included. The objections raised by the assessee are incorporated at para 7 of the order of TPO from pages 8 to 10. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Taking the arithmetic mean at 31.58% the TPO made an adjustment of ₹ 2,92,13,537/-.The assessee made strong objections before the Dispute Resolution Panel (DRP). The main objection was (i) the TPO used single year data, the TPO ought to have used multiple year data; (ii) the choice of comparables used by the TPO are not in line with judicial pronouncements in respect of which the companies selected by the TPO; (iii) that the TPO erred in rejecting outright companies used as comparable by the assessee. The DRP after considering the objections raised by the assessee vis-a-vis the order of the TPO did not find any merit in the objections of the assessee in so far as they related to the adjustment made. Aggrieved by this, the assessee is before the Tribunal. 5. The ld. counsel for the assessee filed detailed chart putting forth his multiple propositions. The main proposition of the ld.counsel is that, if the margin of Excel Infoways Ltd excluded from the final list of the comparable, the average would come to 20.97% as compared to 17.11.% of the assessee which fits within 5% range as provided in the Act. It is the say of the ld. counsel that Excel Infoways Ltd has s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28 ITR (T) 403 (Bangalore-Trib), most of the companies selected as comparables by the TPO himself for employee costs to sales ratio between 30 to 60%. Even if, we ignore the super normal profit margin of this company at 243.69% still this company fails in employee cost to sales ratio. Therefore, in our considered opinion Excel Infoways Ltd do not deserve to be included in the final list of comparable. We accordingly, direct for exclusion of this company from the final list of comparable. As pointed out by the ld. Counsel that if Excel Infoways Ltd is excluded from the final list of comparables, the average of the comparables would come to 20.97%. Since we have excluded Excel Infoways Ltd from the final list of comparables, the average of the comparables of the remaining companies as per TPO being at 20.97% as compared to that of the assessee at 17.11% is within 5% range as per the provisions of law. The international transactions made by the assessee is directed to be treated as at ALP. As we have decided this issue only by excluding Excel Infoways Ltd from the final list of comparables, we do not find it necessary to decide the other issues in this regard raised by the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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