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TMI Blog2019 (9) TMI 1313X X X X Extracts X X X X X X X X Extracts X X X X ..... , the learned Transfer Pricing Officer ('TPO') and the learned Assessing Officer ('AO') under directions issued by the Hon'ble Dispute Resolution Panel ('DRP'), erred in making an addition of Rs. 2,51,30,818 to the Appellant's total income based on the provisions of Chapter X of the Income-tax Act, 1961 ('the Act'). 1.2 The AO/TPO have erred in fact and in law in not providing any reasons to show that the conditions mentioned in clauses (a) to (d) of Section 92C(3) of the Act were satisfied before making an adjustment to the income of the Appellant. 2. Transfer pricing adjustment in respect of software development services of Rs. 32,63,569 On the facts and in circumstances of the case and in law, the Ld. TPO/AO has erred and the Hon'ble DRP has further erred in upholding/confirming the action of the Ld. TPO/AO in 2.1 disregarding comparable companies selected by the Appellant despite it being functionally comparable; 2.2 Cherry picking companies which are not functionally comparable to the appellant, which is also evident from the fact that the TPO has not shared the search strategy, accept reject matrix etc. adopted for sel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also questioning the commercial expediency for availing such services and failed to appreciate the jurisprudence that the Ld. TPO cannot go beyond his powers in questioning commercial decision of the Appellant; 3.4 not applying any method prescribed by the Rules, to determine the arm's length price of the infra-group services i.e. management services and failed to appreciate that the Appellant in its transfer pricing documentation has benchmarked the said intra-group services, by using the Transactional Net Margin Method; 3.5 appreciating the fact that the international transaction of management fees was considered at arm's length in this assessment proceeding for AY 2008-09. Thus the Ld. AO / TPO have not followed the 'Rule of Consistency'. 4. Others On the facts and in the circumstances of the case, the Ld. AO erred in initiating penalty proceedings under Section 271(1)(c) of the Act on the premise that the Appellant has concealed/furnished inaccurate particulars of income without appreciating the fact that adjustment made is not in accordance with the law. 4. The assessee has also filed an additional ground of appeal which reads as under:- 5. Mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss under the Income Tax Act but book profit at Rs. 8.22 crores. The case of assessee was picked up for scrutiny. The assessee was engaged in the business of automated metrology and had Manufacturing Division, Software Division, Sourcing Division and Sales & Marketing Division. The assessee has entered into various international transactions with its associated enterprises. The Assessing Officer noted that the assessee had entered into several international transactions with its associated enterprises. The Assessing Officer made reference under section 92CA(1) of the Act to the Transfer Pricing Officer (TPO) to benchmark arm's length price of international transactions in the hands of assessee. The TPO made an adjustment of Rs. 32,63,569/- in the segment of provision of software services. The TPO also benchmarked the transaction of payment for managerial services in pursuance to an agreement between UK company and it and held that the services provided were routine in nature and were easily available in domestic area and the assessee had not asked for services and there was no need for the services. Hence, the arm's length price of services was determined at Nil. The TPO m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arables. 13. The next concern which the assessee wants to be included is SIP Technologies Ltd. The assessee pleads that the said concern was excluded on the ground that it was persistent loss making concern. However, in assessment year 2006-07, it had shown positive margins of 21.78%. Though in last year, it was shown negative margins of (-) 33.15%, but during the year under consideration, it had shown margins of negative (-) 19.33%. The learned Authorized Representative for the assessee placed reliance at page 223 of Paper Book i.e. in the case of John Deere India Pvt. Ltd. Vs. DCIT reported as TS-927-ITAT-2016(PUNE)-TP, relating to assessment year 2009-10, wherein vide paras 18 and 19 the said concern was held to be not persistent loss making. We have considered the plea of assessee and find merit in the same and following the same parity of reasoning as in the decision of Pune Bench of Tribunal, hold that SIP Technologies Ltd. is to be included in the final list of comparables. The learned Authorized Representative for the assessee pointed out that in case two concerns are excluded and SIP Technologies Ltd. is included, then all other issues in ground of appeal No.2 would becom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een entered into by assessee with its associated enterprise was w.e.f. 01.04.2006. The assessee is availing managerial services under the same agreement from year to year. In assessment year 2007-08, no issue in this regard was raised; in assessment year 2008-09, the TPO accepted the arm's length price but the Assessing Officer held that the said payment was not to be allowed under section 37(1) of the Act. The DRP deleted the addition, against which no appeal has been filed by the Revenue. In assessment year 2009-10 i.e. instant assessment year, no disallowance has been made by Assessing Officer under section 37(1) of the Act, but the TPO had held the arm's length price at Nil. The TPO in final analysis holds the assessee not to have received any services and also holds that there was no need to avail any services. 19. We have in series of decisions already decided similar issue of payment on account of managerial services availed by assessee from its associated enterprises and have held that the TPO or the Assessing Officer cannot sit in judgment of the decision of businessman to avail services and to make payments for that. Further, the assessee has filed documents jus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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