TMI Blog2015 (10) TMI 1077X X X X Extracts X X X X X X X X Extracts X X X X ..... to the file of the Assessing Officer for the verification of this issue, after affording reasonable opportunity of being heard to the assessee company. If it is found on verification that the ratio of related party transactions is more than 15%, these companies may be excluded as comparables. - Decided partly in favour of revenue for statistical purposes. - ITA No: 2630/Del/2011 - - - Dated:- 9-9-2015 - SMT. DIVA SINGH, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER For The Assessee : Ms. Vandana Bhandari For The Department : Sh. Amrendra Kumar, CIT,DR ORDER PER INTURI RAMA RAO, AM This is an appeal filed by the Revenue directed against the order of the CIT(A)-XX, New Delhi, dated 22.03.2011 for the assessment year 2002-03. The Revenue raised the following grounds of appeal: 1. On the facts and circumstances of the case and in law the order of the Ld. CIT(A) is wrong, and the against the provisions of law which is liable to be set aside. 2. On the facts and in the circumstances of the case in law, the order of deleting the addition of ₹ 53,23,591/- on account of upward adjustment of Arm s Length Price of the Internation Transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m s length. Due to availability of reliable data, the respondent assessee-company has made itself as the tested party, i.e., assessee s operating profit margin over the cost has been compared with the margin of other comparable companies in India engaged in similar function. The operating profits to total cost was adopted as the profit level indicate ( PLI ). In the transfer pricing study, the respondent assessee-company had chosen the following 12 comparables and their weighted average operating profit margin was worked out at 4.82% as below: Name of the company OP/TC Allsoft Corporation Ltd. 5.80% Fortune Informatics Ltd. -1.90% Intellivisions Software Ltd. 2.03% Oasis Infotech Ltd. 6.73% Sriven Multitech Ltd. 7.29% Neilsoft Ltd. 5.07% Eastern Software Systems Ltd. 6.29% Cummins Infotech Systems Ltd. -0.90% C S Software ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r discussed above, the arithmetic mean of operating profit over the total cost margins of the comparables for the financial year 2001-02 works out to 11.85%. The arm s length price of the internation transactions entered into by the assessee with its AE is worked out as under: Total Cost of Provision of services by the assessee: ₹ 7,20,21,767/- (Adjusted total Cost of the services provided to AE as provided by the assessee increased by the financial expenses of ₹ 2,51,187/- since the margins of the comparables are on total cost basis which includes financial charges also.) Margin @ 11.85% of the above ₹ 85,32,246 Arm s length price to be charged from the AE: ₹ 8,05,53,513/- 13.1 In the manner discussed above the arm s length price of the international transaction entered into by the assessee with its AE is determined at ₹ 8,05,53,513/- in place of ₹ 6,98,47,580/-. Accordingly, an adjustment of ₹ 1,07,05,933/- is to be made to the income of the assessee being the difference between the arm s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e officer is directed to make necessary modifications. Being aggrieved by the above findings of the CIT(A), the Revenue had come up with the present appeal before us. 8. The learned CIT-DR vehemently argued that the CIT(A) was not justified in deleting the two comparables chosen by the TPO, inasmuch as, no evidence was brought on record establishing that these two comparables had substantial related party transactions. 9. On the other hand, the ld. Authorized Representative relied upon the order of the CIT(A). 10. We heard the rival submission and perused the material on record. The CIT(A) deleted the two comparables, namely, M/s Datamatics Technologies Ltd. and Infotech Enterprises Ltd. on the ground that these companies had substantial related party transactions. The provisions of Section 92 provides that income arising from international transaction is to be computed having regard to ALP. Section 92F(ii) defines arm s length price to mean a price which is applied or proposed to be applied in a transaction between persons other than associated enterprises, in uncontrolled conditions. To compute ALP the results of the international transaction are benchmarked agains ..... X X X X Extracts X X X X X X X X Extracts X X X X
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