TMI Blog2017 (12) TMI 809X X X X Extracts X X X X X X X X Extracts X X X X ..... that the taxpayer was having separate international transaction with its AE, the ALP of the same is to be determined whereas ALP of the other transactions of the taxpayer with non-AE is not to be considered. Even otherwise, TP adjustment is not possible without taking into account the segmental result. As such, TPO/DRP cannot unilaterally adopt entity level result in determining the ALP of international transaction. So, in these circumstances, TP adjustment made by the AO/TPO/DRP by taking the margin of the taxpayer at entry level for TP adjustment is not sustainable, so we hereby remand back the case to the TPO to decide afresh after considering segmental result of the taxpayer for TP analysis. - ITA No.1895/Del./2017 - - - Dated:- 14-12-2017 - SHRI B.P. JAIN, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER For The ASSESSEE : Shri G.C. Srivastava, Divyanshu Aggarwal Suvinay Kumar Dash, Advocates For The REVENUE : Shri Neeraj Kumar, Senior DR ORDER PER KULDIP SINGH, JUDICIAL MEMBER : The Appellant, M/s. M/s. CSR Technology (India) Private Limited (hereinafter referred to as the taxpayer ) by filing the present appeal sought to set asi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial year ending filter while selecting the comparable companies. 9. The learned AO/ learned TPOI Hon ble DRP erred in not considering the fact that the relevant data for the concerned financial year could be deduced from the information available on public domain. 10. The learned AO/learned TPO/Hon ble DRP erred in applying export earning filter of 75% instead of 25% of the total sales, leading to a narrower comparable set. 11. The learned AOI learned TPO/ Hon ble DRP has erred in considering 25% as the threshold limit for Related Party Transactions ( RPT ) filter, without giving any cogent reason. 12. The learned AOI learned TPO/ Hon ble DRP erred in not applying the upper limit on turnover while selecting the comparable companies. 13. The learned AO/learned TPO/ Hon ble DRP erred in not appreciating the fact that since the lower limit on turnover has already been applied mutually by the Appellant as well as the learned TPO while carrying out their respective comparability analysis, upper limit on turnover should also have been provided based on the similar principle. 14. The learned AO/ learned TPO/ Hon ble DRP erred in accepting c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MAM), Operating Profit/ Operating Cost (OP/OC) as the Profit Level Indicator (PLI) and calculated its margin at 16.88%. TPO has not disputed the TNMM method adopted by the taxpayer. However, TPO noticed that the taxpayer has bifurcated its function in AE and non-AE segment while calculating the margin whereas transaction with non-AE segment is minuscule as against AE transaction and hence, recast the account at entity level and calculated the OP/OC at minus 9.92% by adopting TNMM as the most appropriate method. TPO proposed to take 17 comparables having average of 20.92%. After considering the objections raised by the taxpayer, ultimately TPO selected 12 comparables having average of 18.18% and proposed the proportionate adjustment of ₹ 30,815,175,17. 4. The taxpayer carried the matter by way of raising objections before the ld. DRP, which have been disposed off. 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 circumsta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n provided by the taxpayer for the reason that the same is not audited one? 10. When we seek the answer of the aforesaid question in the light of the fact that there is no dispute in applying the TNMM as the most appropriate method and there is no need to go into the comparables, the identical question has already been determined by the Special Bench of the Tribunal in case cited as M/s. LG. Electronics India Private Limited (supra) in favour of the assessee by returning the following findings :- 21.5 . It is undisputed that under the TNMM, it is always the operating profit from the concerned international transaction that is viewed in relation to the total cost, sales or capital employed etc. of that international transaction. It is not as if the percentage of the margin is to be determined by considering the net profit of the entity in relation to the total sales of the entity. When we consider operating profit to total costs of an international transaction, all the items of nonoperating expenses and non-operating income qua such international transaction are liable to be excluded. The correct approach under the TNMM is to consider the operating profit from e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l available at page 567 of the paper book includes inter alia the name of the employees, the month-wise payment for the work exclusively done for non-AE/domestic enterprises. All these details were available before ld. TPO who has not raised any query. This detail was also available before the DRP but has not been considered in the right perspective. 12. Now, the next question arises for determination is :- as to whether segmental results can be rejected for non auditing the same? 13. In case cited as Honeywell Electrical Devices Systems India Ltd. (supra), the coordinate Bench of the Tribunal by relying upon the case of 3i Infotec Ltd. vs. ITO (2013) 35 txmann.com 582 (Chennai) rendered by the Tribunal held that even if such segmental results are not shown in the audited financial accounts, they have to be accepted. The coordinate Bench of the Tribunal in 3i Infotec Ltd. (supra) held as under :- 29. ..Before us also, the ld. CIT/DR could not point out any specific defect in this working of the assessee. The only argument of the Department is that the segment wise working made by the assessee is not audited. In our considered view, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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