TMI Blog2016 (5) TMI 1080X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act should have been sustain by the DRP does not survive. - I.T.A .No.-1427/Del/2014, I.T.A .No.936/DEL/14 - - - Dated:- 2-12-2015 - SHRI R. S. SYAL, ACCOUNTANT MEMBER AND SMT SUCHITRA KAMBLE, JUDICIAL MEMBER For The Appellant : Sh.Harpreet Singh Ajmani, Adv. Ms. Ananya Kapoor, Adv. For The Respondent : Sh.S.L. Anuragi, Sr. DR ORDER PER SUCHITRA KAMBLE, JM This appeal is filed by the assessee against the Assessment Order dated 27.01.2015 for A.Y. 2009-2010 passed under Section 143(2) read with Section 144C of the Income Tax Act, 1961. 2. The grounds of appeal are as follows:- 1. The order passed by the Ld. Additional Director of Income Tax, Transfer Pricing Officer-II (4) (Ld. TPO ), draft assessment order passed by Ld. Income-tax Officer, Ward 18(4), New Delhi (Ld. Assessing Officer ) and the final assessment order passed, pursuant to the directions of the Hon ble Dispute Resolution Panel-II ( DRP ), by the Ld. Assessing Officer are bad in law and void abinitio. 2. The Ld. Assessing Officer has erred in law and on the facts of the case in determining the total income of the Appellant at ₹ 8,77,18,381/- as against a returned incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfer pricing and judicial precedence. 11. That on facts and in law, the Learned DRP has erred in not providing any basis for rejecting certain companies considered comparable by the Appellant and in doing so violated the principles of natural justice. 12. That on facts and in law, the Learned AO/TPO/DRP erred in considering incorrect profit margin of the appellant. 13. That on facts and in law, the Learned AO/TPO/DRP have grossly erred in passing an order without providing the basis of determination of operating cost of the Appellant which has used as a base for determining the quantum of transfer pricing adjustment. 14. That on facts and in law, the Learned TPO/Assessing Officer have erred in passing an order which has computational errors in the margin of the comparable companies used in determination of arm s length margin. 15. That on facts and in law, the Learned AO/TPO/DRP have erred by not considering that the adjustment of the ALP, if any, should be limited to the lower end of the 5 percent as the appellant has the right to exercise this option under the proviso to Section 92C of the Act. Part II- Corporate Tax Grounds 15. That on f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Payment of interest on External Commercial Borrowings CUP 13,315,144 Reimbursement of expenses paid to associated enterprises - 47,587,726 Reimbursement of expenses received from associated enterprises 3,648,929 7. The assessee submitted following comparables 1. Allsec Technologies Ltd. 2. C G VAK Software Exports Ltd. 3. Cosmic Global Ltd. 4. Informed Technologies Ltd. 5. R Systems International Ltd. 6. Vishal Information Technologies Ltd. 7. Aditya Birla Minacs Worldwide Ltd. 8. Cepha Imaging Pvt. Ltd. 8. The TPO finalized the comparables and used in the assessee s case as below: Sl. No. Name of comparable OP/TC(%) 1. Cosmic Global Ltd. 48.2 2. Informed Technologies Ltd. 23.13 3. Vishal Information Technologies Ltd. 38.69 4. Aditya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of tested party with that of the comparables, adjustment be made for working capital for which the reliable data is to be provided by the taxpayer. Working capital is measured by trade receivables/debtors, trade payables/creditors and inventories. Interest cost will be high if the trade receivable time cycle is large. Interest cost will be low if the company can pay its liabilities after a larger period of gap then pay it in a shorter period. Holding of inventory has also interest costs. If inventory turnover is for a shorter period, interest cost will be lower. These parameters affected the overall results of the company. But in reality, the impact is financial in nature due to the requirement of Working Capital. Financial results or interest burden primarily depends on following:- (i) How the Working Capital is financed, either through own source or through borrowed funds. (ii) Terms and conditions of receipts and payments i.e. terms of payments of debtors and creditors (iii) Inventory management through backward forward linkages, the efficiency of holding inventory. Further, interest cost is a financial cost. In order to cover the interest cost, the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erused all the records and proceedings. We have also heard both the parties. In respect of Grounds relating to Transfer Pricing as set out in Part I -Ground No. 3 to 15 on comparables and working capital adjustment, the ITAT, New Delhi in assessee s own case for the Assessment Year 2008-2009 (being ITA No. 6448/Del/12 decided on 18.02.2015) has remitted the matter to the assessment stage for fresh adjudication for the reasons set out in para 10 and 11 of the said judgment. In view of this, the issues relating to the comparables and working capital adjustment before us are identical for A.Y. 2009-2011. Hence, it will be proper to remit both these issues to the assessment stage for fresh adjudication. Needless to say that the assessee be given opportunity to be heard. 15. As relates to the issue of Corporate Tax as set out in Part II- Ground 15 to 16, the Assessing Officer has rightly held that interest on FDRs as Income from other source. There was no business exigency or condition to make short Term FDRs therefore, the investment in FDRs cannot be regarded as inextricably connected with business of the assessee. Accordingly, the interest receipts from such FDRs constitute income ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
