TMI Blog2018 (6) TMI 409X X X X Extracts X X X X X X X X Extracts X X X X ..... e direct the Assessing Officer / TPO to restrict the adjustment, if any, on account of arm's length price of international transactions only to the extent of international transactions with associated enterprises. - ITA No.583/PUN/2016, ITA No.552/PUN/2016 And CO No.18/PUN/2018 - - - Dated:- 6-6-2018 - MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM For The Assessee : Shri M.P. Lohia For The Revenue : Ms. Nirupama Kotru, CIT ORDER PER SUSHMA CHOWLA, JM: Out of this bunch of appeals, cross appeals filed by the assessee and Revenue are against order of DCIT, Circle 1(2), Pune, dated 29.01.2016 relating to assessment year 2011-12 passed under section 143(3) r.w.s. 144C(13) of Income Tax Act 1961 (in short the Act ). The assessee also filed Cross Objections against the appeal of Revenue. 2. The cross appeals filed by the assessee and Revenue and Cross Objections filed by assessee were heard together and are being disposed of by this consolidated order for the sake of convenience. 3. The assessee in ITA No.583/PUN/2016 has raised the following grounds of appeal:- On the facts and in the circumstances of the case and in law, the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act 10. erred in initiating penalty proceedings under section 271(1)(c) of the Act. The above grounds of appeal are mutually exclusive and without prejudice to one another. 4. The Revenue in ITA No.552/PUN/2016 has raised the following grounds of appeal:- 1. The Hon'ble DRP has erred on facts and circumstances of the case and in law, in allowing for the aggregation of the 'installation and commissioning/engineering services' with the manufacturing activity when (i) The manufacturing agreement signed by the assessee company with the AE does not include the so called 'installation and commissioning/engineering services' in its ambit; (ii) The assessee company itself has recognized the service income as a separate revenue stream in the financials, which shows that it has separate revenue and cost centre related to manufacturing and servicing; (iii) The IT Transfer pricing law and the OECD guidelines makes aggregation approach an exception rather than a Rule i.e. Rule 10A(d) and OECD Guidelines Para 1.42 mandate that assessee should use transaction wise Arms Length analysis and the exception could be cases where it is difficult to analyze al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to provision of material handling solutions under transactional net margin method. b) erred in not restricting / proportionating the TP adjustment to international transactions with AEs only, pertaining to manufacturing and service activity. 6. First, we take up the appeal of assessee, wherein various grounds of appeal have been raised. However, grounds of appeal No.1, 2, 5, 6 and 8 are not pressed. The ground of appeal No.3 is general in nature. Hence, the above said grounds of appeal are dismissed. Further, ground of appeal No.9 raised by the assessee is against levy of interest under section 234B and 234C of the Act, which is consequential, hence dismissed. The issue in ground of appeal No.10 is premature, hence the same is also dismissed. 7. Now, effective ground of appeal to be decided is ground of appeal No.4 i.e. in respect of selection of inappropriate set of comparables and not rejecting inappropriate company considered as comparable. 8. The issue in ground of appeal No.7 is consequential i.e. allowing benefit of +/- 5% range. 9. The learned Authorized Representative for the assessee at the outset pointed out that the issue raised in the present appeal is c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Ltd. The learned Authorized Representative for the assessee pointed out that the Transfer Pricing Officer (TPO) had admitted the said concern to be functionally comparable but because of exceptional increase in the turnover, the said concern was not included. Our attention was drawn to the annual report of the said concern, which is placed at page 511 of Paper Book, wherein the gross turnover had only increased from ₹ 28.61 crores to ₹ 30.24 crores and it was pointed out that there was nothing exceptional in the said increase. Further, the said concern was not persistent loss making. In the totality of the above said facts and circumstances, where the TPO had accepted the said concern as functionally comparable, then the same cannot be excluded on the ground that there was exceptional increase in the turnover because the increase from ₹ 28.61 crores to ₹ 30.24 crores i.e. turnover shown in the last year as against the turnover of this year, cannot be said to be exceptional. Accordingly, we find no merit in the findings of TPO and direct the Assessing Officer / TPO to include the said concern in the final list of comparables. The Assessing Officer / TPO is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee, wherein the learned Authorized Representative for the assessee pointed out that ground of objection No.1 is in support of order of DRP. Since, we have dismissed the grounds of appeal raised by the Revenue, ground of objection No.1 is allowed. 17. The ground of objection No.2a is not pressed and hence, the same is dismissed as not pressed. 18. Now, coming to ground of objection No.2b, the learned Authorized Representative for the assessee referred to the order of Tribunal in assessment year 2007-08 in para 14. The issue is against directions of DRP in not restricting TP adjustment to the international transactions with associated enterprises only pertaining to manufacturing and service activity. 19. The issue stands covered by the order of Tribunal in Demag Cranes Components (India) Pvt. Ltd. Vs. DCIT in ITA No.1683/PN/2011, relating to assessment year 2007-08, order dated 31.12.2012, wherein it was held as under:- 14. We have carefully considered the rival submissions on this aspect and find ourselves inclined to uphold the plea of the assessee. Ostensibly, the objective of determining the arm's length price u/s 92C of the Act in relation to an int ..... X X X X Extracts X X X X X X X X Extracts X X X X
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