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2016 (8) TMI 1471

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..... t appeal has been preferred by the assessee against the order of Ld. ACIT Circle 2 (1) (1), International taxation, New Delhi dated 16/02/2015 for assessment year 2010-11 on the following grounds of appeal: 1. On the facts and circumstances of the case and in law, the assessment order/directions passed by the Learned Assessing Officer ('AO') / Transfer Pricing Officer (TPO') / Dispute Resolution Panel ('DRP') is illegal, unjust, bad in law and highly excessive. 2. On the facts and circumstances of the case and in law, the reference made by the AO suffers from jurisdictional error. The AO has not recorded any reason in the draft assessment order based on which, he reached to the conclusion that it was 'necessary or expedient' to refer the matter to the Transfer Pricing Officer ('TPO') for computation of the arm's length price (,ALP'), as is required under section 92CA(1) of the Income-tax Act 1961 ('Act'). 3. On the facts and circumstances of the case and in law, the Ld. AO/Hon'ble DRP/Ld. TPO erred in law and in facts by not following the principle of consistency without change of facts vis a vis previous years. In other words .....

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..... ice, on the facts and in the circumstances of the case and in law, the Ld. AO/Hon'ble DRP/Ld. TPO erred in using single year data as against the multiple year data used by the Appellant, to compute the arm's length price of the international transaction of the appellant using Transactional Net Margin Method ("TNMM") method. 13. Without prejudice, on the facts and circumstances of the case and in law, the Ld. AO/Hon'ble DRP/Ld. TPO erred in placing reliance on the financial data which was not available in the public domain at the time when the economic analysis was undertaken and transfer pricing study was conducted. 14. On the facts and circumstances of the case and in law, the Ld. AO/Hon'ble DRP/Ld. TPO erred in not making suitable adjustments to account for differences in the risk profile of the assessee vis-a-vis the comparables. 15. On the facts and circumstances of the case and in law, the Ld. AO/Hon'ble DRP/Ld. TPO erred by not applying the Proviso to section 92C of the Act and failed to allow the appellant the benefit of variation of 5 percent in determining the Arm's Length Price . 16. On the facts and circumstances of the case and in law, .....

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..... d coordination services TNMM(OP/TC) 3,50,73,914 RS 3 PO: Name of the transaction Method selected Value of International transaction Rendering of administrative support and coordination services TNMM(OP/TC) 17,03,58,098 Reimbursement of expenses to AE 93,51,586 Reimbursement of expenses by AE No Benchmarking 1,19,98,903 BMRCL PO Name of the transaction Method selected Value of International transaction Rendering of administrative support and coordination services TNMM(OP/TC) 73,82,625 Reimbursement of Expenses of AE 12,76,556 2.3 The assessee has chosen transaction net margin method (TNMM) as the most appropriate method (MAM) and operating profit/operating costs (OP/OC) as the profit level indicator (PLI). In the transfer pricing study, the assessee had arrived at 12 comparable companies with an average margin of -4.05%, each using multiple year data, for all the three PO s. This has been compared with the assessee with operating margin of 8.82% for RS 3 project, 9% for RS 1 project and 9.08% for BMRCL project. 2.4 The comparables selected by the assessee for benchmarking international transactions with its AE s are as under: S.NO. Name of the comparable company 1 Access India Advis .....

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..... Procurement Consultants Ltd. 2. HCCA Business Services Ltd. 3. TSR Darashaw Ltd. Comparables accepted by the Ld. TPO for assessment year 2009-10 and 2011-12: 1. Educational Consultants(I) Ltd. 2. ICRA Management Consultants Ltd. 5.1 He submitted that in the event these five comparables are excluded / included accordingly, the assessee would be well within the range of +/- 5%. He submitted that the functionality and the financial segments have not changed in previous and subsequent assessment years, viz-a-viz the year under consideration. We are thus restricting the adjudication only to the extent of the comparability of the five companies disputed by the assessee from being excluded/included as mentioned hereinabove. 5.2 Ld.AR placed reliance upon the following judgments in support of his plea regarding the application of principle of res judicata to the facts of the present case: a) Radhasoami Satsang vs. CIT reported in 193 ITR 321 (SC); b) Tamasek Holdings Advisors (I) (P) Ltd vs. DCIT (2013) 38 Taxmann.com 80 (Mumbai-Trib); c) Britons Carpet Asia Pvt. Ltd. Vs. DCIT (2011) 46 SOT 289 (Pune); d) CIT vs. Neo Poly Pack (P) Ltd. (2000) 245 ITR 492 (Del). 5.3 The Ld. AR submitted tha .....

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..... advisory services etc. whereas Rotem RS 1 PO is performing functions like licensing, coordination maintenance and troubleshooting and marketing and contracting activities, contract execution, testing and commissioning, lies inning/interfacing with the DMRC carried on by Rotem RS 3 PO, without any risk being bone by the assessee. Thus this company is not functionally similar to the activities carried on by the assessee and more so when it has been rejected by the Ld. TPO in the earlier assessment year as well as in the succeeding assessment year. The ld. DR does not dispute regarding the rejection of this company by the Ld. TPO in the earlier as well as succeeding assessment year. Thus following the rule of consistency we direct the ld. TPO to exclude this company in the list of comparables. HCCA Business Services Ltd. 9. This company has been chosen by the Ld.TPO. This is a company that offers services like payroll processing and compensation structuring, management of labour and legal compliances, payroll legs regulatory compliances, employee reimbursement processing and accounting services. In a nutshell this company is a leading service provider in the entire gamut of HR operati .....

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