TMI Blog2019 (4) TMI 1305X X X X Extracts X X X X X X X X Extracts X X X X ..... vidual margins are being compared with aggregate margins that is impermissible under law, therefore, the impugned order is set aside. The A.O. is therefore directed to re-compute adjustment after comparing the margins of individual transactions with A.E. with individual transactions margins with non A.E. Comparing the individual transactions with A.E. with aggregate transactions with non A.E. would give a distorted picture of margins, hence, ground Nos.1 2 of the assessee s appeal are partly allowed as indicated herein above. - ITA No.686 And 685/Ind/2017 - - - Dated:- 16-4-2019 - Shri Kul Bharat, Judicial Member And Shri Manish Borad, Accountant Member For the Appellant : Shri Mohnish Saini And Shri Omkar Arjunwadkar, A.Rs For the Respondent : Smt. Ashima Gupta, CIT(DR) ORDER PER KUL BHARAT, J.M: These two appeals by the assessee pertaining to the assessment years 2012-13 2013-14 are against direction of the Dispute Resolution Panel-2, Mumbai both dated 14.6.17. Similar grounds have been raised in these appeals. Both were taken up together for hearing and were disposed of by way of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equently, this assessment was revised by the Ld. PCIT Bhopal vide his order dated 29.12.2015, thereby the Ld. PCIT referred matter relating to the transfer pricing to the Transfer Pricing Officer (TPO). Thereafter, the A.O. passed a draft order on the basis of the recommendation of the TPO for transfer pricing adjustments. The A.O. on the basis of the recommendation of the TPO made adjustments in respect of transactions related to receipt of contract revenue from projects and adjustment of difference on account of arm s length price for transactions related to payment of technical services to the Associated Enterprises (AEs). Total adjustment was made of ₹ 44,48,880/-. Against this draft assessment, the assessee preferred objections before the Ld. DRP. Ld. DRP partly allowed the objections of the assessee, thereby the adjustments made on account of transactions related to payment of technical services amounting to ₹ 34,12,846/- allowed the objection of the assessee. However, the adjustment made in respect of difference on account of arm s length price for transactions related to receipt of contract revenue from projects of ₹ 10,36,034 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M as most appropriate method. Further, it is pointed out that even if CPM is applied, it has to be applied on an aggregate basis i.e. an average of A.E. projects needs to be compared with average of non A.E projects since the average gross margins earned by the appellant from transactions with unrelated parties ranging from -210.290 to 4549.07% average being 13.1%, which has been compared with average gross margin of transactions with A.Es ranging from -72.60% to 1075.95% average 32.29% gross of projects appellant recognizes revenue on percentage of completion method in accordance with the accounting standard-7. It is not possible to find a proper project with respect to it s A.E., which is completely with similar functionalities to a project, which has been undertaken by appellant were a non A.E. as each project operates in a different life cycle. Moreover, in view of the nature of business of the assessee, the average profitability of the projects depends upon various factors such as nature of work, bidding process etc. It is further contended that the authorities below grossly erred in treating the project with A.E. as a separate transaction. Further, it is contended that even t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngth in earlier years. Further, Ld. TPO/DRP have erred in not allowing a set off of surplus revenue/profit exceeding the arms length price and from the other projects done with the AEs while computing the ALP under a transaction by transaction analysis. We find that the method adopted by the TPO was also held to be correct method. The grievance of adopting this method of the assessee firstly is that it has been done with project to project basis not on the average of all projects. As per the assessee, project to project would not give a true picture as each project has its own life cycle. Secondly, it is stated that set off of surplus revenue/profit exceeding the arms length price and from the other projects has not been given while computing the ALP under a transaction by transaction analysis. We find merit into this contention of the assessee that Ld. TPO erred in comparing individual project margins of transaction with A.E. with aggregate margins earned from transactions with non A.E., which is improper as individual margins are being compared with aggregate margins that is impermissible under law, therefore, the impugned order is set aside. The A.O. is therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X
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