TMI Blog2017 (12) TMI 406X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 21.09.2010 and 23.08.2011 passed by Assessing Officer, New Delhi u/s 143(3) r/w Section 144C of Income Tax Act, 1961 for Assessment Year 2006-07 and 2007-08 respectively. 2. The grounds of appeal are as under:- ( ITA No. 4800/DEL/2010 A.Y. 2006-07) The following grounds of appeal are mutually exclusive of and without prejudice to each another. 1. On the facts and circumstances of the case and in law, the Hon ble Dispute Resolution Panel ( DRP ) erred in confirming the draft order passed by the learned Assessing Officer ( AO ), and thereby confirming the order issued under section 92CA(3) the Income Tax Act, 1961 ( the Act ) passed by the learned Transfer Pricing Officer ( TPO ); 2. The Hon ble DRP/AO erred in law and in circumstances by not providing any reasons for rejection of the Cost Plus Method identified as the most appropriate method by the Appellant and applying the Transactional Net Margin Method ( TNMM ) for the provision of market research and testing services. 3. The Hon ble DRP/AO erred in computing the net profit margin on the basis of the TNMM. 4. The Hon ble DRP/AO erred in determining the Arm s Length Price for the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e margin computation of the comparable companies identified by the TPO, the international transactions undertaken by the Appellant would comply with the arm s length standard embodied in the Act. 13. The Hon bleDRP erred in law and in facts and in circumstances by not giving due cognizance to the information submitted by the Appellant on May 28, 2010, in context of the FAR analysis. 14. The Hon bleDRP erred in law by not evaluating the rejection/acceptance of TNMM method, used as a method of secondary choice applied by the Appellant for the purpose of establishing the arm s length nature of the market research and testing services. 15. The Hon ble DRP erred in law and in facts by not giving due cognizance to the new set of appropriate comparable companies submitted by the Appellant with the Hon ble DRP. 16. The Hon ble DRP/AO erred in law and in facts by not giving due cognizance to the working capital adjustment under taken by the Appellant for establishing arm s length nature of the international transaction, and also not allowing any adjustment for risk. 17. On the facts and in the circumstances of the case and in law, the Hon ble DRP erred in not d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder to improve the comparability of the comparable results and that of the Appellant. The Appellant prays for leave to add, alter, amend and / or modify any of the grounds of appeal at or before the hearing of the appeal. The Appellant prays for appropriate relief based on the said grounds of appeal and the facts and circumstances of the case. 3. For the sake of convenience the facts for A.Y. 2006-07 are taken hereunder as the issue relating to AMP is identical in both the Assessment Years. 4. The assessee company was established as a domestic company in June 2003 to undertake research and development activity in relation to Honda Auto Mobile Power Equipment Companies in India. The Company is engaged in Research Development of any product involved service/review/pasting of the product in the local conditions and to undertake such activities. The domestic company was loaded by Honda R D Company Ltd. Japan as a 100% subsidiary with 100% equity being held by the above company. The research and development activity is conducted in house for the sole use of such research in the development of products in the auto mobile sector and also barely in the power produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rice. The draft order u/s 144C of the Income Tax Act, 1961 was passed and served on the assessee on 24/11/2009 against which the assessee filed objection before the Dispute Resolution Panel (DRP, New Delhi). The DRP vide its order dated 30/8/2010 upheld the additions/disallowances made by the Assessing Officer , wherein the Assessing Officer has made an addition of ₹ 1,77,51,768/-. The Assessing Officer while passing assessment order dated 21/9/2010 held that in the order, the TPO has dealt in detail with each aspect for the determination of correct Arm s Length Price for the international transaction undertaken by the assessee. Thus, an addition of ₹ 1,77,51,768/- is made to the income of the assessee being difference between the Arm s Length Price. 5. The Ld. AR submitted that this Assessment Year is already covered by the Hon ble Delhi High Court s decision in the assessee s own case for Assessment Year 2005-06 (ITA No. 616/15, dated 2/8/2016 wherein in Para 12,13 26, the same is discussed and the matter was restored to the ITAT. For Assessment Year 2005-06 the ITAT passed order dated 29.01.2015. The Hon'ble High Court clearly mentioned in Para 25 that Honda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings. On the other hand there was sufficient material in the form of the remand report of the TPO for AY 2005-2006 as well as DRP s order for 2007-2008 to show that HRDI was not into core R D activity. 26. Accordingly Question (i) is answered in the negative by holding that the ITAT was not justified in concluding that HRDI was involved in R D activity and not provision of market support services. The order of the CIT(A), which was reversed by the ITAT, is restored. The ITAT has decided the issues vide order dated 29.01.2015 for A.Y. 2005-06. Thus, the assessee company has not carried out any international transaction. 10. As related to working capital adjustment the Hon'ble High Court decision was not available before the TPO as well as before the DRP. Therefore, the same should be verified by the TPO/A.O. Needless to say, that the assessee be given full opportunity of hearing. 11. In respect of the Appeal for A.Y. 2007-08, Ground No. 1, 2 and 4 are not pressed by the Ld. AR during the hearing hence, the same are dismissed. As relates to Ground No. 3 and 5, the issues are similar to the A.Y. 2006-07, hence the same are partly allowed for statistical pu ..... 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