TaxTMI 
TaxTMI 
2016 (4) TMI 214
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....te method with Operating Profit / Operating Cost (OP/OC) as Profit Level Indicator (PLI). A search process was undertaken in the data base and on the basis of financial data of the current year as well as previous two years selected 12 companies as comparables with average margin of 19.70% as against margin shown by the assessee at 0.87%. Since, the margin shown by assessee was found to be lesser than the margin of comparables, the assessee on its own made an adjustment to the arm's length price by an amount of Rs. 92,15,556. In the course of proceedings before the Transfer Pricing Officer, he called upon the assessee to compute the margin of the comparables on the financials of the current year only. On the basis of query raised by the Transfer Pricing Officer, assessee updated the margin of the comparable companies as per which the arithmetic mean of the comparable companies was 29.50%. The Transfer Pricing Officer after excluding one of the companies out of 12 selected in the transfer pricing study called upon the assessee to explain why arm's length margin should not be taken at 29.50% for the transaction entered with the A.E. Though the assessee objected to the p....
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.... the basis of current year data. He further found that the assessee itself has made a transfer pricing adjustment of Rs. 92,15,556. Referring to Explanation 7 to section 271(1)(c), he observed, only if the computation of arm's length price by assessee was not in good faith or without due diligence, penalty can be imposed. He was of the opinion that the difference in arm's length price as per assessee's computation and that of the Transfer Pricing Officer is only as a result of average of multiple year data used by the assessee in respect of comparable as against single year data used by the Transfer Pricing Officer. He observed, as at the time of preparing the transfer pricing study the current year data in respect of all the comparable companies was not available in public domain the assessee could not have incorporated such data for computing the margin of the comparables. He observed, computation of margin of comparable companies by the assessee was as per the data available in the public domain on the due date of filing of return of income. Therefore, he ultimately held that as the Transfer Pricing Officer has accepted the method of bench marking the international....
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.... strongly relying upon the observations of the first appellate authority, submitted, as far as the transfer pricing adjustment is concerned, the only difference between the margin computed by the assessee and the Transfer Pricing Officer is as a result of use of multiple data by the assessee in respect of comparables as against current year data used by the Transfer Pricing Officer. He submitted, when the transfer pricing study was prepared and even at the time of submissions of the return of income, current year data in respect of the comparables were not available in public domain. Therefore, in any case of the matter, assessee could not have computed the margin of the comparable companies by using single year data. Learned Authorised Representative submitted, contemporaneous data would effectively mean the data available in public domain on the due date of filing of return of income. Therefore, the data which comes into public domain subsequently and on the basis of which the Transfer Pricing Officer makes the adjustment cannot be considered as a contemporaneous data. Therefore, penalty us 271(1)(c) cannot be imposed alleging furnishing of inaccurate particulars of income. As fa....
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....lied our mind to the decisions relied upon. As stated earlier, assessee had bench marked the price charged for the international transaction by selecting TNMM as most appropriate method with OP/OC as PLI. Assessee has also selected 12 companies as comparable by using multiple year data. It is evident on record that Transfer Pricing Officer has no dispute with regard to the adoption of TNMM as most appropriate method with OP/OC as PLI. He has also accepted all the comparables selected by the assessee except one. The only dispute between the assessee and the Transfer Pricing Officer is in relation to computation of margin of the comparables. While the assessee has computed the margin of the comparables by using multiple year data, the Transfer Pricing Officer has computed on the basis of current year. This alone is the sole reason for the adjustment made by the Transfer Pricing Officer. Uncontroverted facts emerging from record as well as finding of learned Commissioner (Appeals) indicate that on the due date of filing of return current year data in respect of many of the comparables were not available in the public domain, therefore, the assessee considering the data available in pu....
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....5/2012, dated 8th July 2014. The Hon'ble Jurisdictional High Court while dismissing the appeal of the Department, held as under:- "1. Having heard Mr Ahuja, learned counsel appearing on behalf of the Appellant, we find that this Appeal cannot be entertained as it does not raise any substantial question of law. The imposition of penalty was found not to be justified and the Appeal was allowed. As a proof that the penalty was debatable and arguable issue, the Tribunal referred to the order on Assessee's Appeal in Quantum proceedings and the substantial questions of law which have been framed therein. We have also perused that order dated 27th September 2010 admitting Income Tax Appeal no.2368 of 2009. In our view, there was no case made out for imposition of penalty and the same was rightly set aside. The Appeal raises no substantial question of law, it is dismissed. No costs." Similar view has also been expressed by the Hon'ble Karnataka High Court in DCIT v/s Ankita Electronics Pvt. Ltd., ITA no.297/2014. Though, the learned Departmental Representative has relied upon the decision of the Hon'ble Gujarat High Court in CIT v/s Prakash S. Vyas, in Tax Appeal no.606/2010, whe....