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2016 (5) TMI 1098 - ITAT MUMBAI

2016 (5) TMI 1098 - ITAT MUMBAI - TMI - Transfer pricing adjustment - Held that:- As during the course of transfer pricing proceedings, it was shown by the assessee that assessee demonstrated that taking OP/OI as its PLI, the arithmetic mean margin of the comparables was 8.71% which was less than the margin shown by the assessee at 12.63%. The TPO suggested changing the PLI as OP/TC and if the PLI is taken as OP/TC the arithmetic mean margin of the comparables was 9.96% which was less than the m .....

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the total income of the assessee under the normal provisions of the Act - Held that:- Only those adjustments are permissible to the book profit as have been prescribed u/s 115JB. The adjustment/additions made under the transfer pricing regulations are governed by altogether different sets of provision as contained in Chapter X of the Act. There is no such provision under the law that permits the AO to make adjustment on account of transfer pricing addition to the amount of profit shown by the a .....

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hout even mentioning that under what provisions this addition was being made. Such an approach is highly unfair and brings undue and avoidable hardship to the tax payers and we recommend that such a casual approach should be avoided by the revenue officers, as it may tarnish image of the income tax department, which may in turn discourage voluntarily compliance by the taxpayers. Thus, we delete the addition made by the AO - Decided in favour of assessee. - ITA NO.8522/Mum/2011 - Dated:- 22-4-201 .....

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earned Assessing Officer ("hereinafter referred to as AO") and the DRP have erred in proposing a transfer pricing adjustment of ₹ 1,30,72,762 /- under section 92CA(3) of the Act, in respect of the international transactions entered into by the Appellant during the year ended 31 March, 2007. 2. The learned AO and the DRP have erred in rejecting the comparable companies selected by the Appellant to benchmark its international transactions. 2.1 The learned AO and DRP have erred in c .....

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y of the comparable companies is to be considered instead of product comparability. 3. The learned AO and the DRP have erred in rejecting comparable companies which were accepted by not only the predecessor AO but also the successor AO for the assessment year 2006-07 and assessment year 2008-09 respectively. 4. Without prejudice to the aforesaid grounds, the learned AO has erred in not granting the benefit of the variation / reduction of 5% from the arithmetic mean while determining the arm' .....

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presentative (AR) on behalf of the Assessee and by Shri N.K. Chand, Departmental Representative (CIT-DR) on behalf of the Revenue. 3. The solitary issue raised in this appeal is with respect to transfer pricing adjustment. 3.1. During the course of hearing, Ld. Senior Counsel of the assessee submitted, at the very outset that only issue involved in this appeal is that same comparables have been accepted in all prior and subsequent years, there is no change in facts or business of the assessee an .....

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e considered for determination of arms length price and no adjustment was made since the transactions of the assessee were found to be within the range of ALP determined by the TPO in all those years. Our attention has also been drawn on the paper book filed by the department internal correspondence made between the TPO and the jurisdictional Director of Income Tax (TP) to show that in all the earlier years and subsequent years, same comparables were considered for bench marking the transactions .....

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ted for benchmarking the transactions of the assessee was TNMM. The product similarity has to be seen while applying CUP method and not under TNMM because under the CUP, the focus is on the price of goods sold or transferred. In his support, he relied upon the judgment of Mumbai bench of the Tribunal in the case of Diageo India (P) Ltd. v. DCIT 34 taxmann.com 284 and of special bench in the case of Maersk Global Centres (India) P. Ltd. ACIT 147 ITD 83 (Mumbai -Trib.) 3.3. We have gone through th .....

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s that no adjustment was made in any of the preceding four years. With the assistance of the parties, it has also been noted from the facts brought before us by way of paper book by the Ld. CIT-DR that no TP adjustment has been made even in the subsequent four years i.e. A.Ys. 2008-09, 2009-10, 2010-11 and 2011-12. It has been further shown to us that in all earlier years and subsequent years, same comparables have been accepted by the TPO. But, for benchmarking international transactions of the .....

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t necessary to go any more into details or intricacies of the issues. Even, during the course of hearing before us nothing has been brought out by the Ld. CIT-DR to justify the contrary stand in the impugned year and nothing has been brought out showing any change in facts or nature of business activities or position of law. Under these circumstances, we do not find any justification with the TPO to reject these comparables. It is noted by us that during the course of transfer pricing proceeding .....

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. We find that adjustment made by the TPO was contrary to law, and therefore, same is directed to be deleted. Since we have deleted the adjustment on primary grounds, we are not deciding other grounds. Accordingly, ground no.1 to 5 of the main grounds may be treated as partly allowed. 4. During the course of hearing Ld. Counsel also drew our attention on the additional ground wherein the assessee has contested the action of AO in increasing the books profits for the purpose of section 115JB by t .....

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