TMI Blog2019 (4) TMI 1476X X X X Extracts X X X X X X X X Extracts X X X X ..... tomers. The TP Study report of the assessee states that ther is no such functional dissimilarity. Same is also the finding of ld CIT(A) which is also not controverted before us. Regarding allocation keys adopted by assessee, ld TPO has not stated that how same are incorrect. Therefore, there is no infirmity in the order of the learned CIT(A) we confirm the same. Appeal of revenue dismissed. Appeals of subsequent years are also dismissed being identical to the facts. - ITA No. 4710/Del/2012 & 2316/Del/2015, ITA No. 583/Del/2014 & 6152/Del/2015 - - - Dated:- 22-4-2019 - Shri H.S. Sidhu, Judicial Member And Shri Prashant Maharishi, Accountant Member For the Assessee : Shri Nitin Narang, AR, Shri Amit Arora, CA And Ms. Tarimi Nijhara, AR For the Revenue : Shri Sandeep Kr. Mishra, Sr. DR ORDER PER PRASHANT MAHARISHI, AM, 1. This is the bunch of four appeals in case of an assessee for four different years involving similar ground of appeal in dispute and therefore they are heard together and disposed of by this common order. 2. For assessment year 2007 08 in ITA No. 4710/De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned CIT(A) has accepted internal TNMM benchmarking of the assessee without appreciating the reasons given by the learned transfer pricing officer in para No. 3.1 of his order for rejection of the internal TNMM. It was further stated that TPO has clearly held that the associated enterprise and non-associated enterprise segments are not comparable as the service income is only ₹ 17,900,000/- in non AE segment compared to service income of ₹ 192,000,000/- in the Associated Enterprise segment. It was further stated that transfer pricing officer has further held that it is not possible for the segment having revenue of only 8.5% of the total revenue to take down the other segment from the profit of 10% on entity level to loss. He submitted that segmental account has been drawn with an intention to establish its transactions with associated enterprise at arm s-length. The learned DR further relied upon the decision of the coordinate bench in case of FCIOEN connectors Ltd vs ACIT 77 taxmann.com 223 wherein it has been held that internal TNMM cannot be adopted in case of huge difference in turnover of associated enterprise and non-associated enterprise. It was further state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was further stated that the learned CIT(A) has rejected 7 out of 8 comparables selected by TPO without assigning any reason and therefore according to him the decision of the CIT A is perverse and fit to be set aside. With respect to the certificate of chartered accountant he submitted that same is submitted only for assessment year 2007 08 and not for other years. 6. The learned authorised representative submitted that TPO has accepted the segmental account submitted by the assessee as per para No. 3.1 of his order. He further referred to page No. 32 of the order of the learned CIT(A) to show that the learned CIT appeal has considered all the arguments raised. He also referred to page number 115 of his paper book which is as Transfer Pricing Study Report wherein it is submitted that the company does not incur any marketing or business development expenses for business procured from associated enterprise, however the company incurred substantial cost towards marketing and business development expenses for procuring business from independent 3rd parties. He therefore submitted that marketing cost is for the non-AE business only. He therefore submitted that there i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... new comparables stating that their average profit level indicator of operating profit/operating expenditure is(-) 12.06%. Assessee came out with a new internal segmental profit and loss account between non-AE and AE as under:- particulars Non-associated enterprise Associated enterprise Profit and loss account Project income 7959145 192064997 210024142 Difference in exchange 02/05/2007 219309 239816 Amount written back 2528 27031 29559 Total operating income 17982179 192311338 210293517 Other income 19607 209691 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Operating expenditure 174726999 36033912 Operating profit 17584338 (18021733) Net profit margin 10.06% (50.1)% 10. The learned TPO questioned the abandoning original search by the assessee in the transfer pricing study report and also the segmentation. Therefore, he rejected the segmentation created by the assessee for the reason that there is an inappropriate indirect expenses allocation, nonallocation of other expenses etc. Therefore, the learned Transfer Pricing Officer, computed the profit level indicator of assessee taking the total operating income of ₹ 210293517/ and the total operating expenses of ₹ 210760912/- and thereby deriving operating loss of ₹ 467395/- and stated that the profit level indicator of operating profit/operating expenses of the assessee is (0.22) percentage. Thereafter he selected the comparables afresh, allowed the assessee to obj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct and allocation was based on actual expenses. After recording the finding that the business activity of the company was technical consultancy in a specialised field and the major customers are mostly government organisations and all the businesses were allotted on the basis of open tenders. For wide difference between the revenue earned with PE and with the non-AE companies, and the marketing expenditure he held that there may be no correlation between the revenue earned on the marketing expenditure in the initial few years of the development of the business cycle. He further approved the argument of the assessee that in order to procure business from the associated enterprise, the appellant did not incur any advertisement expenses however for the purpose of acquiring business with Non-AE assessee need to incur these expenditure. Therefore, they are properly allocated to the non-AE segment. He further held that as long as the services are similar, segmental results will have to be accepted. He further held that the learned TPO while rejecting the revised segmental figures, has accepted the original segmental figures and also used the margin over the cost as given by the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port prepared as per requirement of act and rules of Income Tax can be sidelined with new set of comparables so produced. Ld. CIT(A) is absolutely silent on the issue. (2) Ld. CIT(A) also erred on allowing the plea of assessee, merely on the submission of the assessee that comparable companies selected by the TPO in its order without remanding back the matter to the TPO. The Ld. CIT(A) has accepted assessee's plea of rejecting a comparable having RPT of 15%. In this regard Judicial ITAT decision in the case of M/s Global Logic India P. Ltd. (2011 TTI-35- ITAT-Del-TP), M/s ADPP Limited (2001-TO-44-ITAT-Hry-TP) and ST Microelectronics (2011-TII-63-rTAT-Del-TP), where it is upheld that threshold limit of RPT should be 25%. And in case of two other comparables, reasons given by the assessee that current year financials were not available which is factually incorrect. The annual reports of all the comparable companies were very much available on the public domain. Thus, Ld. CIT(A) grossly erred in deletion of TP Adjustment made by the TPO which was scientific and accurate in all respect. (3) On the facts and in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g operating profit/operating cost at 4.46% in the case of a transaction and loss of 1.15% in case of non-AE transaction. The transfer pricing officer rejected the segmental results given by the assessee and also all the comparables and selected his own 5 comparables and determined the average PLI of 36.09% adopting operating profit/operating expenses as the profit level indicator. Accordingly, adjustment was proposed. 14. Both the parties agreed before us that the facts of the case are identical to the facts of the case for assessment year 2007-08, wherein on identical facts the learned assessing officer has preferred this appeal. 15. We have also carefully considered the orders of the lower authorities and find that the facts are identical to the facts of the assessment year 2007- 08. We have already decided the appeal of the AO as per this order for assessment year 2007 08, wherein we have upheld the order of the learned CIT(A). For similar reasons, we also uphold order of the learned CIT A for assessment year 2008 09 and dismiss the appeal of the learned assessing officer. 16. In the result ITA NO. 583/Del/2014 for assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsfer pricing officer found that the assessee has shown the margin of operating profit/operating cost of 10.36% in its transaction with the associated enterprise and profit of 2.10% on its transactions with non-associated enterprises. The learned transfer pricing officer also rejected the internal transactional net margin method employed by the assessee in his TP study report. On careful perusal of the orders of the lower authorities it is apparent that facts are identical to the case involved in the appeal for assessment year 2007 08 filed by the learned assessing officer. By this order we have already dismissed appeal of the learned assessing officer upholding the order of the learned CIT(A) and therefore, for similar reasons, we also dismiss the appeal of the learned assessing officer for this year also. Accordingly ITA No. 2316/Del/2015 filed by the Assessing Officer for assessment year 2009-10 is also dismissed. 21. Now we come to the appeal of the learned assessing officer wherein he has raised the following grounds of appeal in ITA No. 6152/Del/2015 for the Assessment Year 2010-11:- 1. Whether on the facts and in the circumstances of the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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