TMI Blog2016 (2) TMI 261X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of services to the file of the Assessing Officer/Transfer Pricing Officer. It is accordingly ordered. - Decided partly in favour of assessee for statistical purposes. - ITA No. 907/MUM/2015 - - - Dated:- 18-12-2015 - SHRI JASON P. BOAZ ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER For The Appellant : Shri Rajan Vora/Nikhil Tiwari For The Respondent : Shri N.K.Chand ORDER PER JASON P. BOAZ, A.M: This appeal by the assessee is directed against the order of assessment for assessment year 2010-11 passed u/s.144C(13) r.w.s. 143(3) of the Income Tax Act,1961 (in short the Act ) vide order dated 30/12/2014 in pursuance of the directions issued by the Dispute Resolution Panel ( DRP ) u/s.144(5) of the Act vide order dated 14/11/2014. 2. The facts of the case, briefly, are as under:- 2.1 The assessee is a Permanent Establish ( PE ) of Tata Motors European Technical Centre-UK ( TMETC-UK ) incorporated in the UK and a wholly owned subsidiary of Tata Motors Ltd., India ( TML ). In the year under consideration the Assessing Officer ( AO') made a reference u/s.92CA(1) of the Act to the Transfer Pricing Officer ( TPO ) for determination of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Since the average profit margin of the comparable companies was at 14.72% vis-a-vis the assessee s margin of 6.65%, the TPO in his order u/s. 92CA(3) of the Act dated 3/1/2014 proceeded to work out the TP adjustment at ₹ 2,89,12,090/- to the arms length of the assessee s international transactions. The Assessing Officer then completed the draft order of assessment under section 144C(1) r.w.s. 143(3) of the Act vide order dated 24/2/2014, wherein the income of the assessee was determined at ₹ 6,44,58,579/- as against the returned income of ₹ 3,69,92,093/- declared in the return of income filed for assessment year 2010-11 on 15/10/2010. The assessed income, inter-alia, included the T.P adjustment of ₹ 2,89,12,090/- proposed by the Transfer Pricing Officer. 2.4 Aggrieved by the draft order of assessment for the assessment year 2010-11 dated 24/02/2014, the assessee filed its objections thereto before the DRP. The DRP issued its directions under section144C(5) of the Act vide order dated 14/11/2014. The DRP s directions upheld the action of the Transfer Pricing Officer in rejecting foreign comparables for bench marking analysis and in selec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that Appellant's 'Permanent Establishment' ('PE') is an Indian entity. 3. The Hon'ble Dispute Resolution Panel ('DRP') has erred in law and on facts in rejecting the UK companies selected by the Appellant as comparable disregarding the facts and submissions that these are comparable companies. 4.Without prejudice to the ground that Indian companies cannot be considered for benchmarking international transactions; A) The learned AO has erred in law and on facts in cherry picking 4 companies as comparables which are functionally non-comparable. B) The learned AO has erred in law and on facts in cherry picking companies with high margin instead of following detailed, systematic and methodical search process. 5. Without prejudice to the ground that Indian companies cannot be considered for benchmarking international transactions, the Hon'ble DRP should have directed fresh comparability analysis to select Indian comparables which are functionally comparable to appellant, as comparables chosen by the learned AO to benchmark the transaction are functionally different: 6. Without prejudice to other grounds, the learned A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its foreign transactions of provisioning of services is to be held in favour of the assessee following the decision of the Co-ordinate Bench of this Tribunal in the assessee s own case for assessment years 2008-09 and 2009-10. 4.3 Per contract, the Ld. Departmental Representative was heard and he emphatically supported the orders of the authorities below. 4.4.1 We have heard the rival submissions and perused and carefully considered the material on record, including the judicial precedent cited. We find that the decision of the Co-ordinate Bench of this Tribunal in ITA No.7630/Mum/2012 and 1698/Mum/2014 dated 22/12/2014, of which one of us is the author, has accepted the contentions of the assessee that foreign comparables can be used to benchmark the assessee s international transactions in the provisioning of services, and at para-11, thereof has held as under:- 11. Here in this case, there can no dispute with regard to the fact that the tested party is TMETC, whose operating profit is to be bench marked by carrying out functional analysis of its controlled transactions for which reliable data for its comparability is available in the country where it is located, then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omparable after confronting to the assessee. In that case, for the search of comparability assessee will provide necessary assistance to the TPO. With this direction, the matter of transfer pricing adjustment is restored back to the file of the TPO/AO. The Ground No.1 as raised by the assessee is thus treated as partly allowed for statistical purposes. 4.4.2 Following the aforesaid decision of the Co-ordinate Bench of this Tribunal for assessment year 2008-09 and 2009-10 (supra), we also hold that the facts and circumstances of the case in the year under consideration being similar to those of the earlier assessment years, 2008-09 and 2009-10, foreign comparables (i.e. UK comparables) can be taken into account for carrying out FAR analysis and benchmarking of the assessee s international transactions with its Associated Enterprise s for determining those Arm's Length Price. It is also accordingly held that the selection of Indian comparables by the Transfer Pricing Officer is not accepted. In view of the fact that the Transfer Pricing Officer has not examined the comparability of the UK comparables chosen by the assessee, he is directed to do so and if the assessee s compa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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