TMI Blog2017 (1) TMI 454X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the FAA does not suffer from any legal infirmity. Confirming the same, we decide the first ground of appeal against the assessee. With regard to the markup of 23. 45%, we find that the assessee had included only two of the items of the profit and loss account i. e. salary and the rent, that it had not included the other charges for determining the ALP. We are of the opinion that the matter needs further verification on part of the AO. If the assessee had not incurred any expenditure for the alleged three items same should not be considered for mark-up purposes. The issue is restored back to the file of the AO for the limited purposes i. e. to decide as to whether the assessee had claimed expenditure under the head salary and rent o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xplain as to why the markup should not be applied to the entire cost incurred since the assessee was rendering the exclusive services to the AE. s. In its reply, the assessee stated that it had filed the audit report erroneously, that due to changes in the shareholding patterns and the directors of the AE. s it could be concluded that it had not entered into any IT. s with the AE. s. In its support the assessee submitted a copy of certificate issued by the chartered accountant of the foreign entity. As per the AO, the assessee did not file an explanation with regard to proposed markup adjustment. Considering the available material, the AO held that assessee had not submitted any documentary evidence like transfer of shares, appointment of n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had to be considered as qualifying amount for the markup on the invoices to be raised on AE s as per the method applied by it. He found that assessee had debited total expenditure of ₹ 12, 63, 947/-, that it had considered salary and rental expenses amounting to ₹ 10. 15 lakhs. By applying the mark-up at the rate of 23. 45% on the total expenditure, the AO worked out the gross value of the transaction at ₹ 15. 60 lakhs and made an upward adjustment of ₹ 3. 06 lakhs to the total income of the assessee under section 92C (4) of the Act. 3. Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority(FAA). Before him, the assessee made elaborate submissions contending that St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee. He further held that the assessee had not filed an explanation with regard to markup rate of 23. 45% for the expenses other than salary and rent, that the assessee had not produced any documentary evidence with regard to annual reports of the other companies for verification, that it had not filed any TP study report during the assessment proceedings for the appellate proceedings, that it had not followed the provisions of section 92, that the assessee had not discharged its primary onus of benchmarking the transaction. He referred to the case of Aztec Software and Technology Services Ltd. (294 ITR-AT-32) and upheld the order of the AO. 4. Before us, the Authorised Representative (AR) argued that Star and DTL were not A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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