TMI Blog2018 (10) TMI 1183X X X X Extracts X X X X X X X X Extracts X X X X ..... roceeding to consider the margin of the taxpayer at the entity level for the transfer pricing analysis. So, by accepting the TNMM as the most appropriate method and in the face of the fact 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. Respectfully, following the findings of the coordinate bench, we direct the TPO to decide the issue afresh after considering the directions of the coordinate bench [supra]. - Appeal of assessee allowed for statistical purposes. - ITA No. 6805/DEL/2015 - - - Dated:- 22-10-2018 - Shri N.K. Billaiya, Accountant Member, And Ms. Suchitra Kamble, Judi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s model of the taxpayer while providing services to both AE and non-AE and thereafter erred in disregarding the segmental result of the taxpayer and proceeded to consider the margin of the taxpayer at the entity level for TP analysis. TPO in principle has not rejected twin fold business model of the taxpaye : one, in case of AE, fixed cost plus mark up is assured for the services rendered whereas in case of non-AE, no assured profit for the taxpayer is there for providing services. TPO has rejected the segmental information of the taxpayer merely on the ground that transaction with non-AE is minuscule. TPO has not raised any query as to segmental result nor has considered the reply filed by the taxpayer giving complete detail, which were al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sale by the assessee to its foreign AE and there is no other transaction of sale to any outsider and also there is no other international transaction. But if there are several unrelated international transactions, as is the case before us and the assessee or the TPO has applied the TNMM in a wrong manner on entity level for testing any of such transactions, then the remedy lies in correcting such mistake rather than drawing legally unsustainable conclusions by taking such mistake as a correct legal position. 11. However, coordinate Bench of the Tribunal in as M/s. LG. Electronics India Private Limited (supra) case held that the sanction is for applying the TNMM only at transactional level and not on entity level. It is further hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, there is no legal requirement that the segment wise working submitted before the TPO should be audited by the Assessee's CA. Moreover, it is not open to the Revenue to reject the working prepared by the assessee... 14. Coordinate Bench of the Tribunal in case cited as Lummus Technology Heat Transfer BV (ITA No.6227/Del/2012), available at page 441 of the paper book, also held that segmental results cannot be rejected on the ground that the same are not audited. TPO/DRP was required to examine the same if the same were maintained in the ordinary course of business. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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. 18. 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.. 6. Respectfully, following the findings of the coordinate bench, we direct the TPO to decid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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