TMI Blog2018 (1) TMI 1411X X X X Extracts X X X X X X X X Extracts X X X X ..... n by the taxpayer, the ld. TPO has wrongly given the average at 14.24% which is incorrect. So, TPO is directed to adopt the correct average PLI as per working available at page 194 of the paper book. TPO was required to consider the segmental account to determine the ALP of the international transaction. Taxpayer is directed to again place on record segmental accounts with identifiable cost in profit and loss account of the taxpayer to be examined by the ld. TPO. Denying the benefit of +/- 5% by applying the TNMM under Second Proviso to section 92C (2) Tolerance margin in the instance case is to be determined after making correct computation by the TPO, as discussed in the preceding paras. We are of the considered view that in case, variation between the ALP as determined u/s 92C (1) and the price at which the international transaction has actually been undertaken exceeds the tolerance margin then the taxpayer is not entitled for benefit of +/- 5%. This exercise is to be carried out by the TPO after correct computation by the TPO in the light of the decision rendered by the Special Bench of the Tribunal in IHG IT Services (India) (P.) Ltd.[2013 (5) TMI 309 - ITAT DELHI]. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... developing trade fairs, seminars and similar projects. The taxpayer is also into the business of arranging for orders in the field of international trade fairs and exhibition and promoting, organizing Indian participation in trade fairs outside India. 50% of the equity of the taxpayer is held by Koelnmesse International GmbH, Germany. The taxpayer entered into international transaction during the year under assessment as under :- S. No. Description of transaction Method Value (in Rs.) 1 Reimbursements received - 2669762 2 Collection of sale of entry tickets - 4355235 3 Representation services Cost Plus Method 8284836 4 Sale of package space catalogue - 8090451 3. The ld. Transfer Pricing Officer (TPO) has not disputed the international transaction entered into by the taxpayer during the year under assessment qua sale of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29,228,272 EXPENDITURE Payment towards services for trade fairs and exhibitions 12,274,858 Payments and provisions for employees 9,524,123 Administrative Selling other expenses 13,192,218 Depreciation 1,634,892 Total Op. Expenses (TC) 36,626,091 Operating Profit (OP) (7,397,819) OP/TC (%) (20.19%) The average OP/TC of the three comparables are tabulated as under :- S.No. Name of the Company OP/TC (%) 1 IBI Chematur (Engg. Consultancy) Ltd. 19.01% 2 ICRA Online Limited 8.85% 3 L T Ramboll Consulting Engineers Limited 14.88% Average 14.24% 9. The ld. TPO on the basis of pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whole; that benefit of +/- 5% has not been given to the taxpayer; that the taxpayer has adopted the scientific criteria in the allocation of cost towards representation services segment being essentially the proportion of time spent by the employees at the respective location on representation services segment; that the TPO has erred in adopting Transactional Net Margin Method (TNMM) when the taxpayer has followed one of the standard method viz. CPM in the present case. 11. However, on the other hand, the ld. DR for the Revenue while relying upon the order passed by the ld. TPO/DRP contended that the TPO has rightly computed the cost base representation activities separately and has added collection of sale of entry tickets on revenue side as well as on cost side as the collection of sale of entry tickets has been aggregated with the representation activities; that the TPO has rightly rejected the CPM under the identical situation in case of the taxpayer in AY 2005-06 and has adopted TNMM which has been confirmed by ITAT in ITA No.2139/Del/2012 date 19.03.2014 against which no appeal has been filed by the taxpayer; that the TPO has taken the proportionate cost culled out of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the original proceedings. When directions of Hon ble High Court were there, the TPO was required to consider the segmental account to determine the ALP of the international transaction. 15. Even during the original TP proceedings, the TPO has not demanded any segmental account. The ld. DR for the Revenue contended that no such segmental account was given to the TPO during original as well as remand proceedings. When we examine para 1 at page 9 of the TP order, TPO has categorically mentioned that, I have not been able to find any segmental accounts with identifiable costs in the Profit and Loss account of the assessee. Hence the basis of such segmentation in respect of the cost base for representation services is not determinable . So, in the given circumstances, we are of the considered view that the taxpayer is directed to again place on record segmental accounts with identifiable cost in profit and loss account of the taxpayer to be examined by the ld. TPO. 16. In so far as question of denying the benefit of +/- 5% by applying the TNMM under Second Proviso to section 92C (2) by ld. TPO/DRP is concerned, the ld. AR for the taxpayer relied upon the decision rendered ..... X X X X Extracts X X X X X X X X Extracts X X X X
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