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2016 (2) TMI 874 - ITAT DELHI

2016 (2) TMI 874 - ITAT DELHI - TMI - Transfer pricing adjustment - computation of ALP based on interim and unaudited financial statements - Held that:- We are of the considered opinion that we have to restore the entire issue of determination of ALP to the file of the A.O. for fresh adjudication in accordance with law. When audited financial statements are available in the public domain, computation of ALP based on interim and unaudited financial statements cannot be accepted. A fresh exercise .....

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t to transfer pricing has developed over the period of time and the assessee/revenue should not be deprived of taking benefit of the latest legal developments on any issue. The AO is directed to consider all these fresh contentions and arguments raised by the assessee and dispose of the same and arguments in accordance with law. The AO/TPO shall afford adequate opportunity to the assessee. - Decided in favour of assessee for statistical purposes - ITA No. 4492/Del/2009 - Dated:- 11-1-2016 - SMT. .....

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subsidiary of Schneider France. Schneider India is engaged in manufacture of low voltage and medium voltage equipment i.e. Air Circuit Breakers (ACB), Miniature circuit Breakers (MCB), Moulded Case Circuit Breakers (MCCB), RM6, Contractors, Push Buttons and Ring Master Units. Schneider India markets products sold under its international brands - Merlin Gerin, Telemecanique, Square D, Clipsal and LK. In addition, Schneider India is engaged in distribution of the following imported equipment: &bu .....

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trading constitute the core business activities of Schneider India. Further, during the impugned financial year, Schneider India has rendered the following IT related and other services to its overseas affiliates on a limited basis: they are E-services, implementation and development of ERP software packages (such as Scala, an accounting software package), research and development support activities; and business support services. 2.1. During the A.Y. 2005-06 the assessee was primarily engaged .....

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, (f) Research and development services, (g) Business support services. Out of the above, business activities, activities corresponding to d, e, f and g were provided only to its associated enterprises. 3. The assessee, conducted a Transfer Pricing (T.P.) study and thereafter made a suo motto adjustment of ₹ 1,09,39,880/- to its total income on account of adjustments in arm s length price (ALP) of Research & Development (R&D) expenses. The Transfer Pricing Officer (TPO) in his orde .....

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ction of "import of components for manufacture of electrical equipment" and in doing so inter-alia have grossly: 1.1. erred in relying on the interim/unaudited margins of comparables and not considering the audited financials while calculating operating margin for determination of arm's length price considering which Appellant will fall within the +/-5% range as provided under second proviso to section 92C(2) of the Act; 1.2. erred by selecting a comparable namely lndo Asian Fusege .....

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"Import of electrical equipment for Resale and in doing so inter-alia have grossly: 2.1. erred in relying on the interim/unaudited margins of comparables and not considering the audited financials while calculating operating margin for determination of arm's length price; and 2.2. erred in not allowing benefit of +/- 5% range provided under second proviso to section 92C(2) of the Act. 3. On the facts and circumstances of the case, the Ld. CIT(A) has wrongly confirmed adjustment of ͅ .....

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omparables which have related party transactions of more than 25% of their turnover; 4. On the facts and circumstances of the case the Ld. CIT(A) has wrongly confirmed adjustment of ₹ 1,43,66,383 (revised to ₹ 34,26,505 as per order under Section 154 of the Act, issued by Addl. Director of Income-tax, Transfer Pricing Officer-II(2)), New Delhi) in respect of the Appellant's international transaction pertaining to provision of research & development services and in doing so ha .....

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of the case, the Ld. CIT(A) has erred in adjustment of ₹ 12,05,601 in respect of international transaction of "Business support services" and in doing so have inter-alia grossly: 5.1. erred in relying on the interim/unaudited margins of comparables and not considering the audited financials while calculating operating margin/return on cost for determination of arm's length price; and 5.2. erred in not allowing benefit of +/- 5% range provided under second provisio to section .....

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by the appellant company. 8. On the facts and circumstances of the case, the Ld. CIT(A) has erred in confirming the entire addition of INR 1,43,66,383 in respect of the Appellant's international transaction pertaining to provision of research & development transaction by ignoring the contention of the Appellant that it had itself offered an amount of INR 1,09,39,880 for taxation in its return of income in respect of the said transaction. 9. On the facts and circumstances of the case, th .....

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llant undertakes minimal business risks as against comparable companies that are full-fledged risk taking entrepreneurs, and by not allowing a risk adjustment to the Appellant on account of this fact. 11 . On the facts and circumstances of the case, the Ld CIT (A) has erred in disregarding the arm's length price (,ALP') as determined by the Appellant in the Transfer Pricing ('TP') documentation maintained by it in terms of section 92D of the Act read with Rule 10 D of the Income- .....

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r authorities, case laws cited, we hold as follows. 6. The sum and substance of the submissions of the Ld.Counsel for the assessee is that, at the time of transfer pricing (T.P.) study, the audited financial statements of the comparables of all the segments were not available and hence the assessee was forced to take unaudited financial statements, for the purpose of arriving at the A.L.P. He pleaded that subsequently the audited financial statements came to be available in the public domain and .....

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ited financial statements, falls within the range of ±5%, as provided under the Second Proviso to S.92C(2) of the Act. He further contended that comparables where related party transactions are more than 25%, should be directed to be excluded. Further he argued that working capital adjustment should be directed to be granted to the assessee. On a query from the Bench he submitted that he is not pressing ground nos. 1.2, 1.3 and 8 and that he is confining his arguments to the relief mentio .....

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