9911796707
TMI Blog2014 (2) TMI 1222X X X X Extracts X X X X X X X X Extracts X X X X ..... the action of the Additional Director of Income-tax (International Taxation -Range 1 ('AO') and Additional Commissioner of Income-tax (Transfer Pricing) - 1(2) ('TPO') of making an unjustified Transfer Pricing adjustment of Rs. 6,08,81,192. 2. On the facts and in the circumstances of the case and in law the Learned CIT(A) has erred in confirming the action of Learned AO/ TPO retaining Zenith Infotech Limited as a comparable company without considering the functional comparability and other relevant factors. 3. On the facts and in the circumstances of the case and in law the Learned CIT(A) has erred in misinterpreting the Grounds of Appeal filed by the Appellant with regard to loss making companies rejected by the TPO without considering t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the action of the AO/TPO in disregarding the application of multiple-year data while computing the margins of alleged comparable companies as such data had an influence in determining the pricing policy of the Appellant. 9. On the facts and in the circumstances of the case and in law the Learned CIT(A) has erred in confirming the action of the AO/TPO in not granting the benefits of proviso to section 92C(2) of the Act to the Appellant." 3. Ground No. 1 is general in nature and needs no separate adjudication. 4. Before us, the Ld. Counsel for the assessee stated that the assessee is not keen in pursuing the grievance raised vide ground No. 3 & ground No. 8. These grounds are accordingly dismissed as not pressed. 5. The surviving grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent 191,299,269 7. Having entered into the aforestated international transaction, the assessee submitted statutory reports as per the provisions of the Act. The assessee adopted Transactional Net Margin Method (TNMM) as the most appropriate method. Taking operating margin as the profit level indicator (PLI), the assessee used five broadly comparable independent companies as stated hereinabove. S. No. Company name 2005-06 OPM% 2006-07 OPM% 2007-08 OPM% Weighted Average 1. Antelec Ltd. 10.88 NA NA 10.88 2. Canvasm Technologies Ltd. NA 34.43 -35.43 -22.76 3. Tata Technologies Ltd. 7.65 3.55 NA 5.54 4. WTI Advanced Technology Ltd. 4.44 NA NA 4.44 5. Zenith Infotech Ltd. 34.14 46.96 40.27 41.34 &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d., (ii) M/s. ORG Informatics Ltd and (iii) Wireless T.T. Info Services Ltd. This claim of the assessee was not entertained by the TPO who was of the opinion that the assessee itself in its original report has taken M/s. Zenith Infotech Ltd., as functionally comparable. The TPO also rejected the claim of the inclusion of additional comparables stating that the assessee has not given any reasoning or search strategy for including these new comparables nor the assessee has explained why these comparables were not considered in original TP study. Following 3 comparables finally taken by the TPO Comparably company OPM for F.Y. 2007-08 1. Antelec Ltd. 14.82% 2. Tata Technologies Ltd. 15.87% 3. Zenith Infotech Ltd. 40.7% Arithmetic Mean ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ude the said company from the set of comparables. The Ld. Counsel further stated that the lower authorities grossly erred in not allowing the assessee to include additional comparables without properly examining those comparables. 13. Per contra, the Ld. Departmental Representative supported the findings of the Ld. CIT(A). 14. Having heard the rival submissions and perused the orders of the lower authorities and the relevant material evidence brought on record in the light of the Rule 18(6) of the Income Tax Appellate Tribunal Rules 1963, in our understanding of law, internal TNMM should get precedence over the external TNMM comparables. This view is also supported by various decisions of the Tribunal one of which is M/s. Technimont Icb I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le. Ex consequenti, it follows that an internal comparable uncontrolled transaction is more noteworthy vis-à-vis its counterpart i.e. external comparable." Respectfully following the aforestated findings of the Tribunal, in the interest of justice and fair play, we restore this issue back to the files of the TPO. The TPO is directed to consider the internal comparable TNMM. The assessee is directed to provide necessary details to the TPO. Being fair to both parties, we allow the assessee to bring forth additional comparables and direct the TPO to accept/reject the same after necessary examination/verification as per the provisions of law. Needless to mention that the TPO shall give reasonable opportunity of being heard to the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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