TMI Blog2022 (1) TMI 345X X X X Extracts X X X X X X X X Extracts X X X X ..... software was not taken into consideration at the time of benchmarking the transaction. A mere wrong mention in the Transfer pricing study report about the inclusion of purchase of software does not place the case of the Revenue at a better pedestal when factually the purchase of software was not considered by the assessee for benchmarking. As evident that the reasons ascribed by the authorities below for rejecting the segmental profitability are not tenable. The corollary is that the segmental profitability, as determined by the assessee, was correct, as per which OP/OC from services to AR at 18.04% is better than OP/OC from non-AE services at 13.44% showing the international transaction at ALP. There is another dimension of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 56/PUN/2021 - - - Dated:- 7-1-2022 - SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER Assessee by : Shri Rahul Mehta Shri Aayush Modi Revenue by : Shri Piyush Kumar Singh Yadav ORDER PER R.S.SYAL, VP : This appeal by the assessee is directed against the final assessment order dated 13-04-2021 passed by the Assessing Officer u/s 143(3) r.w.s. 144C(13) r.w.s. 143(3A) 143(3B) of the Income-tax Act, 1961 (hereinafter referred to as the Act ) in relation to the assessment year 2016-17. 2. The only issue raised through various grounds in this appeal is against the making of transfer pricing adjustment amounting to ₹ 1,73,70,067/-. 3. Tersely stated, the facts of the case are that the assessee is an Indian C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al TNMM. He chose certain comparable companies with their adjusted OP/OC mean margin at 15.71%. Applying the same as benchmark, he notified transfer pricing adjustment of ₹ 2,42,37,997/-. The Dispute Resolution Panel (DRP) made certain alterations to the comparables, which led to their mean OP/OC at 13.13%. The AO, giving effect to the direction rendered by the DRP, made addition of ₹ 1.73 crore, against which the assessee has come up in appeal before the Tribunal. 4. We have heard both the sides and scanned through the relevant material on record. The assessee rendered Engineering Design services amounting to ₹ 25.49 crore to its United States AE. Simultaneously, it also provided similar services in domestic market as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the result that a sum of ₹ 76,53,927/- directly relatable to AE segment was allocated to other segments. It further observed that the assessee in its transfer pricing study report considered Provision of Engineering services; Provision of Accounting services; Receiving Technical Consultancy services and Provision for purchase of software for benchmarking. However, the Purchase of software products of ₹ 36.82 lakh was allocated solely to the Trading segment, which ought to have been considered in the service AE segment. 5. Firstly, we take up the reasons adduced by the TPO for rejecting the assessee s allocation of Costs and determination of the PLI from services AE and services non-AE segments. The view point that hourly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harges, Commission and Discount, Provision for Doubtful Trade Receivables have been done on actual basis. The DRP echoed the TPO s view by observing that the assessee did not consider ₹ 76.53 lakh in the AE segment out of expenditure pertaining to purchase of software products and consultancy services incurred to the AE. This does not validate the DRP s point of view. It has been noticed above that the assessee received ₹ 26.00 crore from its AEs and ₹ 63.00 crore from non-AEs for rendering similar services. The Consultancy services received were deployed commonly for rendering services both to the AEs and non-AEs. The other point of view taken by the DRP is that though the assessee initially mentioned in its transfer pric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gment consisting of both the AEs and non-AEs as one unit, the combined PLI comes to 14.72%, as has been noted with tabulation in the objection raised by the assessee before the DRP at para no.10.4.9 showing OP/OE at 19.04% from services (AEs) and 14.33% from services (non-AEs) and aggregate at 14.72%. As against this combined margin from Services, the mean margin of the comparables taken by the AO in the order giving effect to the DRP s directions, is 13.13%. The assessee s combined margin is also better than that of the comparables, which makes the international transaction at ALP. The DRP adduced one more reason that the assessee did not consider purchase of software in the services segment which ought to have been considered, as was init ..... X X X X Extracts X X X X X X X X Extracts X X X X
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