9911796707
TMI Blog2016 (11) TMI 327X X X X Extracts X X X X X X X X Extracts X X X X ..... s Datamatics Ltd. with calibrated OP/TC margin of 1.76% from the list of comparables. 3. Briefly stated, the facts of the case are that the assessee is a 100% subsidiary of Tech Books, US. It is engaged in providing IT enabled data conversion services and also providing marketing, business development/product selling services etc. to its associated enterprises (AEs). The assessee reported an international transaction with receipt of a sum of Rs. 19,96,58,147/- on account of `Software development and customized electronic data.' The assessee applied Transactional Net Margin Method (TNMM) in its Transfer pricing study as the most appropriate method for demonstrating that the international transaction of rendering the services was at arm's le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) directed the inclusion of Datamatics Ltd. by holding that the rejection of Datamatics Limited by the TPO on the ground that it followed an irregular annual pattern, was not tenable particularly when the financial results could have been calibrated so as to coincide with the financial year of the appellant. He found that the assessee had suitably adjusted financial results of Datamatics Limited by which the operating results for the financial year 2004-05 were determined for a period of 12 months. This was held to have been done so as to coincide with the financial year of Datamatics Ltd. with that of the appellant. He also noticed that the assessee computed OP/TC of 1.76% of this company, which was fair and reasonable and in harmony ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsider it appropriate to note the relevant part of subrule (4) of Rule 10B which provides that: "the data to be used in analyzing the comparability of an uncontrolled transaction with an international transaction shall be the data relating to the financial year in which the international transaction had been entered into." It is obvious from the language of sub-rule (4) that the comparability of an uncontrolled transaction can be analyzed only with the "data relating to the financial year" in which the international transaction has been entered into. In other words, if the tested party has March as year ending, then, the comparables must also have the data relating to the financial year ending 31st March itself. The reasoning given by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1st March, 2005 on the basis of data given by this company. At the cost of repetition, we reiterate that only when correct figures of an otherwise functionally comparable company are possible to deduce for the year ending matching with the assessee, without carrying out any adjustments to such accounts by any interpolation or extrapolation, that it would merit inclusion in the list of comparables. In the otherwise scenario, such a company would automatically go out of the reckoning. 8. There is no dispute that the calculation of OP/TC of Datamatics Ltd. for the current year was entertained by the ld. CIT(A) for the first time, who did not seek comments of the AO/TPO on such calculation. It is further manifest that this calculation was neve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Apart from that, the assessee also raised certain other grounds qua the transfer pricing adjustment. Since the assessee's profit margin came within the eligible range with the inclusion of Datamatics Ltd., the ld. CIT(A) stopped there and did not deal with other issues challenged before him. The ld. AR argued that if on a fresh examination by TPO/AO, it emerges that Datamatics Ltd. cannot be included in the list of comparables, then the entire exercise of the transfer pricing be restored to the file of the TPO/AO, who will be obliged to determine the ALP afresh without having any regard to the exercise done earlier. The ld. AR contended that in such fresh proceedings, the assessee should be made free to ask for the inclusion of new compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be rendered without remedy. In such a situation, the assessee can argue before the tribunal that the issues challenged before the CIT(A), which remained undecided, be adjudicated upon. Then, the tribunal will be duty bound to either decide such issues directly or remit the matter to the lower authorities for adjudication. In no case, the entire assessment can be directed to be redone even on the issues which attained finality and remained undisputed before the CIT(A). 11. Adverting to the facts of the instant case, we find that the assessee simply challenged a few issues of transfer pricing adjustment before the ld. CIT(A) as is apparent from Form No. 35. Some of such issues were not decided by the authority for the reason of relief allo ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
