TMI Blog2018 (8) TMI 1807X X X X Extracts X X X X X X X X Extracts X X X X ..... DGMENT MRS. S. SUJATHA J. - 1. This appeal is filed by the Revenue purportedly raising substantial questions of law arising from the order of the Income-tax Appellate Tribunal, Bangalore Bench B , Bangalore, in IT[TP]A No.136/ Bang/2015 dated July 20, 2016, relating to the assessment year 2010-11. 2. The substantial questions of law framed by the Revenue in the memorandum of appeal are as under : 1. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in directing the Assessing Officer/Transfer Pricing Officer to confine arm's length adjustment to the value of international transactions in the manufacturing segment of the asses see by relying on the decision of it in the case of the assessee itself which has not reached finality without appreciating that Transfer Pricing Officer has chosen TNMM method as the most appropriate method for determination of arm's length price (ALP) with regard to the manufacturing segment and has accepted the same comparable as selected by the assessee for benchmarking analysis ? 2. Whether on the facts and in the circumsta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company on the ground that it has 90 per cent. of its income from Dubai operations in comparison to the assessee's 100 per cent. income from the Indian operations. It appears that the Transfer Pricing Officer has considered the export income from Dubai clients of the company as income from Dubai operations. Accordingly, we set aside the issue of comparability of this company to the record of the Assessing Officer/Transfer Pricing Officer for readjudication of the same after considering the correct and proper facts and details of the company. 30.3 We have considered the rival submissions as well as the relevant material on record. There is no dispute that this company is earning its revenue from the 'on site' services provided to the offshore clients. Further this company is a leader in the industry and enjoyed a huge brand value and owns intellectual property. By considering all these facts, the Co-ordinate Bench of this Tribunal in the assessee's own case (IT(TP)A No.1534/Bang/2012 vide order, dated April 11, 2014 for the assessment year 2008-09 has held in paras 11.2 to 11.4 as under : . . . Accordingly, when no substantial differenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut any restriction as held by the Co-ordinate Bench of this Tribunal in the case of Citrix R D India Pvt. Ltd. in IT(TP) A No. 1289/Bang/2014 wherein it was held that the Transfer Pricing Officer cannot restrict the working capital adjustment artificially from the actual computation. Regarding substantial question of law No. 4 : 20. We have considered the rival submissions as well as the relevant material on record. At the outset we note that the Transfer Pricing Officer has treated the arm's length price (ALP) of royalty in question at nil on the ground that the assessee failed to produce any supporting evidence as to how the royalty has been computed and further the assessee has failed to show that the assessee has derived some benefit from the transfer of technology for which the royalty to be paid to the associated enterprise. As far as the justification and deriving the benefit from transfer of technology is concerned this is beyond the scope of the process of determining the arm's length price by the Transfer Pricing Officer, therefore we do not agree with the view of the Transfer Pricing Officer that the assessee was required to esta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the corresponding expenditure shall also be excluded from the operating cost for the purpose of computing the operating margin. Further the Transfer Pricing Officer has made adjustment on the entire manufacturing segment instead of value of international transactions. 22. The learned Departmental representative has relied upon the orders of the authorities below. 23. Having considered the rival submissions as well as the relevant material on record, we find merit in the contention of the assessee that if sub-lease income is excluded from the operating profit then corresponding lease expenditure shall also be excluded from the operating cost while computing the operating margin of the assessee. Accordingly, we set aside this issue to the record of the Assessing Officer/Transfer Pricing Officer to compute the operating margin of the assessee after excluding the corresponding lease expenditure from the operating cost. The Transfer Pricing Officer is also directed to confine the adjustment to the value of international transactions only. 4. However, this court in a recent judgment in I.T.A. Nos. 536 of 2015 connected with 537 of 2015 deliv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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