TMI Blog2017 (11) TMI 1471X X X X Extracts X X X X X X X X Extracts X X X X ..... xpayer ) by filing the present appeal sought to set aside the impugned order dated 30.12.2015, passed by the AO in consonance with the orders passed by the ld. DRP/TPO under section 143 (3) read with section 144C of the Income-tax Act, 1961 (for short the Act ) qua the assessment year 2010-11 on the grounds inter alia that :- 1 . On the facts and circumstances of the case and in law, the Ld . Assessing Officer ( 'AO' ) erred in referring the case to the Ld . Transfer Pricing Officer ( TPO' ) , which was bad in law . 2 . On the facts and circumstances of the case and in law, the assessment order / directions passed by the Ld . AO / Ld . TPO / Hon'ble Dispute Resolution Panel CORP' ) are bad in law . 3 . On the facts and circumstances of the case and in law, the Ld . AO / Hon'ble DRP erred in confirming the transfer pricing adjustment amounting to INR 17,60,73,335 of the appellant . 4 . On the facts and circumstances of the case and in law, the Ld . AO / Hon'ble DRP / ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant, to compute the arm's length price of the international transaction of the appellant using Transactional Net Margin Method ( TNMM ) method . 12 . On the facts and circumstances of the case and in law, the Ld . AO / Hon'ble DRP / Ld . TPO erred in adding the amount pertaining to reimbursement of expenses by AE to the operating revenue and operating costs of the appellant even though the same was in the nature of pass through cost . 13 . On the facts and circumstances of the case and in law, the Ld . AO / Hon'ble DRP / Ld . TPO erred in not excluding third party expenses while calculating operating profits / operating costs as profit level indicator ( PLI ). 14 . On the facts and circumstances of the case and in law, the Ld . AO / Hon'ble DRP / Ld . TPO erred in not making suitable adjustments to account for differences in the risk profile of the appellant vis - avis the com parables . 15 . On the facts and circumstances of the case and in law, the Ld . AO / Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s onus. Consequently, TPO proceeded to calculate the Arm s Length Price (ALP) of international transaction qua provision of support services as under:- Total Cost Rs . 1,221,612,094 ALP at a margin of 16 . 38 % Rs . 1,421,712,154 Price received Rs . 1,245,638,819 Adjustment u / s 92CA Rs . 176,073,335 and thereby enhanced income of the taxpayer by ₹ 17,60,73,335/- on account of transfer pricing adjustment. 4. The taxpayer carried the matter before the ld. DRP by way of raising objections which are rejected by the ld. DRP. Feeling aggrieved, the taxpayer has come up before the Tribunal by way of filing the present appeal. 5. We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case. 6. At the outset, ld. AR for the taxpayer to cut short his arguments contended that he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of making payment of Rs . 95,50,31,150 /- ( on account of arbitral award ) by the taxpayer to the DMRC made on behalf of its AE and consequently reimbursed forms part of the margin calculation to be added to revenue and cost for benchmarking the international transaction? 11. The ld. AR for the taxpayer drew our attention towards order passed by ld. DRP under Rule 13 of the Income-tax Rules, 2009, the operative part of which is reproduced as under for ready perusal:- Decision of the Panel After considering the rectification request of the assessee the relevant paragraph is corrected and is replaced with the following paragraph : The Panel has carefully examined the matter . The arbitration award was in respect of payment of customs and excise duty exemptions granted by the Government of India in relation to RS1 project . The perusal of the Audit Report in respect of RS1 project shows Ia ( a ) the project office is regulate in depositing with appropriate authorities undisputed statutory due including provident fund, income tax, sales tax, wealth tax, service tax, custom duty, cess and other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elate to payment of service tax, custom duty, and other taxes and duties, therefore, the treatment to be meted out to these expense would be the same as to the arbitration award . If the assessee has already included these expenses in the cost base for purpose of margin calculation, it would clarify the treatment in regard to the payment on account of arbitration award, since, the nature of expenses in respect of the arbitration award and above reimbursements are the same . If not then following a consistent policy their treatment should be the same as in respect of Arbitration Award i . e . these should also form part of the cost base or otherwise depending on findings by the TPO as discussed above . The TPO is directed to follow consistent policy in respect of treatment of these reimbursement and the reimbursement of the arbitration award . The issue raised by the assessee in the application for rectification is rectified as above . 12. Ld. DRP has taken the view that, the nature of expenses in respect of arbitration award is the same with regard to the payment of service tax, customs duty and other taxes and dues but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payer for statistical purposes. GROUND NO . 14 17. The taxpayer claimed risk adjustment on the ground that companies operating in an uncontrolled environment will earn a risk premium whereas the taxpayer does not face some risks which are faced by the comparables, the taxpayer being a captive unit. However, the ld. TPO rejected the taxpayer s claim for risk adjustment. 18. Ld. DRP for the Revenue contended that the risk has to be explained in case of each comparable and economic analysis cannot be the basis for risk adjustment in the absence of complete data provided by the taxpayer. However, the ld. AR for the taxpayer contended that the risk adjustment is required to be given on each comparable as has been held by the coordinate Bench A , Pune Bench of the Tribunal in case of Honeywell Turbo Technologies ( India ) Pvt . Ltd . vs . DCIT in ITA No . 2584 / PUN / 2012 order dated 10 . 02 . 2017 by following the case of Sony India Pvt . Ltd . cited as 114 ITD 448 by making following observation :- 33 . Further, the Delhi Bench of Tribunal in the case of Sony In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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