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M/s Bio Merieux India Pvt. Ltd. Versus Dy. Commissioner of Income Tax

2015 (6) TMI 927 - ITAT DELHI

Transfer pricing adjustment - TPO rejected the internal bench marking carried out by the assessee since the segmentation of its accounts was artificially created by the assessee for the purpose of transfer pricing - TPO has taken OP/Sales as Profit Level Indicator (PLI) and taken the segmental of the comparable companies wherever it was available - Held that:- Order dated 30.4.2010 passed by the Dispute Resolution Panel (DRP), New Delhi u/s. 144C of the I.T. Act, 1961 is a cryptic and non speaki .....

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h. Neeraj Jain, Adv. & Ms. Deepali Agarwal, CA For the Respondent : S h. Judy James, Standing Counsel ORDER PER H.S. Sidhu : JM This appeal by the Assessee is directed against the assessment order dated 22.6.2010 of the Assessing Officer passed u/s. 143(3) r.w.s. 144C of the I.T. Act, 1961 pertaining to assessment year 2006-07. 2. The brief facts of the case are that the assessee in its transfer pricing report had created segmental accounts and based on that an internal TNMM analysis was car .....

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on (India) Ltd. and Span Diagnostics Ltd., as comparable companies. While doing so the TPO has taken the segmental of the comparable companies wherever it was available. The assessee has objected to the selection of these comparables on the grounds of the functions performed by these three companies and also on the segmental accounts. 3. The TPO vide order dated 15.10.2009 has determined the arm s length price w.r.t. the international transactions carried out by the assessee and directed the AO .....

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-tax Act (the Act) at an income of ₹ 43,65,760 as against the returned loss of ₹ 1,23,96,776. 2. That the assessing officer erred on facts and in law in making an addition of ₹ 1,67,41,313 to the income of the appellant, on account of the alleged difference in the arm's length price of international transactions undertaken during the previous year. 3. That the assessing officer erred on facts and in law in disregarding the internal benchmarking undertaken by the assessee fo .....

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assessee; (d) the allocation of expenditure on the basis of turnover cannot be made because as per terms and conditions of the agreement between the assessee and the AE, the assessee was required to incur expenditure on discounts, marketing, maintenance and after sale services and was required to main prescribed infrastructure for reporting and sales administration. Accordingly, these AE specific expenditure cannot be allocated on the basis of turnover. ( e) in support of the other claim of the .....

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fic error in the segmentation of profitability made by the appellant. 5. That the assessing officer erred on facts and In law in undertaking benchmarking analysis applying TNMM considering certain external comparable companies disregarding the internal comparison available on record. 6. That the assessing officer erred on facts and in law in not appreciating that internal comparison for application of TNMM undertaken by the appellant was accepted in the Transfer Pricing assessment for the preced .....

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e assessing officer erred on facts and in law in considering Casil Health Products Ltd., Organon (India) Ltd and Span Diagnostics Ltd. as comparable companies for undertaking the benchmarking analysis applying TNMM. 7.2 That the assessing officer erred on facts and in law in taking the operating profit margin of 4.26% of Casil Health Products Ltd. at entity wide level disregarding the loss of 13.31% from the "diagnostic product segment" available in the audited financial statements of .....

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ganon (India) Limited as part of the set of comparable companies for applying TNMM on entity-wide basis without appreciating that significant part of turnover of the said company was from manufacturing operations of different drugs, capsules, contraceptives, injectables, cream, powder and other products as opposed to trading of "diagnostic products" undertaken by the appellant. 7.5 That the assessing officer alternatively ought to have considered operating profit margin of Organon (Ind .....

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facts and in law in not appreciating that in absence of data to determine operating profit margin from "Trading segment", Span Diagnostic could not be relied upon as comparable company for undertaking the benchmarking analysis applying TNMM. 7.8 Without prejudice, that the assessing officer erred on facts and in law in considering the combined net operating profit margin of M/s. Casil Health Products Limited for applying TNMM instead of considering only net operating profit margin of .....

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