TMI Blog2019 (8) TMI 1888X X X X Extracts X X X X X X X X Extracts X X X X ..... ter of GSR Technology (India) (P.) Ltd [ 2017 (12) TMI 809 - ITAT DELHI ] held that even if such segmental results were not shown in the audited financial accounts, they had to be accepted. There was no legal requirement that the segment wise working submitted before the TPO should have been audited by the Assessee's Chartered Accountant. See Infotec Ltd. [ 2013 (5) TMI 834 - ITAT CHENNAI ] We note that in the instant case the assessee provided software development services to the AE generating revenue which constituted 99.24% of total AEsales. The assessee rendered a large variety of services to non-AEs such as drawing consultancy services (generating revenue which constituted 94.30% of the total non-AE sales), annual maintenance of website, annual maintenance contract for hardware, video editing and hiring of camera equipment, CD sales, digital media sales, charges for gift online etc., among other services. Since the services rendered by the assessee to the AE are different from the services rendered by the assessee to non-AEs, the assessee determined the arm's length nature of the international transaction under the TNMM based on segmental accounts duly certified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cline to interfere in the order passed by the ld CIT(A), his order on this issue is hereby upheld and ground No.4 raised by the Revenue is dismissed. Kireeti Soft Technologies Ltd - We note that in the assessee`s case under consideration, the employee cost to sales ratio of Kireeti Soft Technologies Ltd is 24.31%, whereas the TPO set the threshold at 25% and rejected the aforesaid company. The TPO has not disputed, otherwise functional or FAR (function-asset-risk) comparability between the assessee company and Kireeti Soft Technologies Ltd. We reject the contention of the TPO and accept Kireeti Soft Technologies Ltd as comparable to the assessee company. That being so, we decline to interfere in the order of ld CIT(A) and dismiss the ground No. 5 raised by Revenue. Akshay Software Technologies Ltd. be accepted as functionally comparable to the assessee as it is clearly evident from the annual report of the comparable company itself that it is engaged in rendering software development activity only. Avani Cimcon Technologies Ltd. - As total revenue of the said company stands at INR 3.05 crore out of which the operational revenue stands at INR 2.83 crore. The cost incurre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,412,721/-. The assessee company entered into international transactions with its AE ( i.e. controlled transactions) which involved receipts of INR 1,77,88,045/- the components of which are stated below: Sales to AE Nature of International Transaction Amount Received, or receivable (INR) Percent- age to AE sales Provision of software development services to AE 1,76,53,360 99.24% Provision of engineering design services to Gulf Lime, LLC (unrelated customer in the overseas market) through AE 1,34,685 0.76% Total 1,77,88,045 The arm s length price of the international transactions representing software services provided to the associated enterprises (AE) is determined by applying transactional net margin method (TNMM), stating to be the most appropriate method. The operating profit to operating cost ratio is taken as the profit level indicator (PLI) in TNMM analysis. The PLI of the company is arrived at 37.68% (based on segmentation made on controlled an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... length nature of the international transaction under consideration. For the purpose of application of the TNMM, the assessee company prepared a segment reporting that disclosed two separate segments viz., (l)'Transactions with Net Guru Inc. USA' and (2) 'Transactions with independent customers from separate functions'. The first segment disclosed the revenue generated from AE and the corresponding cost allocation, whi1e the second segment disclosed the revenue generated from independent/unrelated domestic customers by performing separate functions and the corresponding cost allocation. 3. The said segment report (enclosed in page no.124 to 126 of the paper book) was duly verified and certified by the independent Statutory Auditor of the assessee company. The said 'Auditor's Certificate' along with annexure containing the segment reporting referred to hereinabove were duly signed by the independent Statutory Auditor of the assessee company on 11th August, 2010, having been the same date as that at which the 'Auditors' Report to the Members of NetGuru Limited', 'Balance Sheet as at 31st March, 2010' and 'Profit Loss Account for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjustment taking into account the PLI of the comparables selected by him (that is, 40.34% computed above) which is given below: Percentage of transaction with related party and unrelated is calculated as under: The arithmetic mean of the PLI is taken as the arm s length margin. Based on this, the arm s length price of the software development services segment rendered by the taxpayer to its AE(s) is computed as under: Average PLI of Comparable 40.34% The price charged by the taxpayer to its Associate Enterprise is compared to the Artm's Length price as under : This way the ld. TPO worked out the transfer pricing adjustment to the tune of Rs. 1,16,82,709/-. 7. Aggrieved by the order of the ld. TPO / A.O. the assessee carried the matter in appeal before the ld. CIT(A) who has deleted the addition made by the transfer pricing officer. Aggrieved by the order of the ld. CIT(A), the Revenue is in appeal before us and raised the following revised grounds of appeal: 1. That in the facts and circumstances of the case, the Ld. CIT(A) has erred in law by deleting an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Now we shall take these grounds of appeal one by one. 8. Ground No. 1 raised by the Revenue is general in nature therefore, it does not require adjudication. 9. In ground No. 2, the Revenue has challenged the Segmental Report of the assessee. Ground No.2 is reproduced below: That in the facts and circumstances of the case, the Ld. CIT(A) has erred in accepting the segmental profitability statement of the assessee because of the following reasons: a) Segmental profitability statement is not a part of the audited financial / statement. b) Now working notes was provided in support of the segmental profitability. c) The cost allocation has been done without any proper allocation keys. 10. Brief facts qua the issue are that during the TPO proceedings, the ld. TPO asked the assessee to submit the segmental information and data. In response to that the assessee submitted the information about segmental data, which is reproduced below: ......the income from software development activities constitutes 99.24% of the aggregate value of the controlled transactions. Therefore, the assessee has benchmarked the controlled transactions by selecting comparab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e financial accounts of company and given his report together with schedule 1 to 15. Nowhere in the report has the auditor given segment reporting. Now, the same has been produced by the A/R of the assessee without the authentication of the directors or under the seal of the company. Hence, the veracity of the same cannot be relied upon. The assessee has not produced the details of Project value, Total Man hour worked by the employee in each project and the total resource utilized, the stages of project development and the employee utilized. The assessee in its 3CEB report has mentioned that it has urged Cost Plus method for benchmarking the transaction, but when the case is referred to TPO the assessee in its transfer pricing report has used TNMM method. The assessee submitted that the uncontrolled domestic transaction are largely varied innature but the same time given a statistics that 99.24% of such transaction is drawing and Consultancy charges. However, it is to state here that the software development activities and software consultancy are one and the same and is classified under information technology sector. From the segment report submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercise and hence it should not be relied. 14. On the other hand, Ms. Rituparna Sinha, ld Counsel for the assessee argued that first of all there is no requirement to get the segment report audited separately. However, the assessee has taken a lot of precaution from his side and produced a segment report, duly verified and certified by the Statutory Auditor of the assessee, in its Transfer Pricing Documentation Report ( vide paper book page no. 24) and duly submitted to the TPO during the course of hearing. Proper allocation key has been mentioned in the segment report prepared by the assessee. However, the TPO rejected the aforementioned segment reporting and computed the net profit indicator / profit level indicator of the assessee (i.e. OP / TC) at (-) 15.30% on aggregate basis (i.e. profit level indicator at enterprise level considering international transactions as well as domestic transactions). The TPO computed the arithmetic mean of the profit level indicators of the comparable companies at 37.18% in the letter No. DDIT (TPO-III)/KOL/NL/92CA(1)/2013-14/77, dated 06.01.2014 and subsequently at 40.34% in the order dated 23/01/2014 u/s 92CA(3) of the Act. Based on the comput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or (Return on Total Cost) for the controlled transactions was worked at 37.68%, whereas the arithmetic mean of the net profit indicators of comparable companies selected from public domain was worked at 23.45%. It indicated that the international transactions undertaken by the assessee during the financial year ended 31st March, 2010, adhered to the arm s length standard prescribed by the Indian Transfer Pricing Regulations. This way, ld Counsel for the assessee submitted before the Bench that the assessee has submitted a detailed working of Segment Report before the ld TPO, as mentioned above, therefore, the allegation of the Ld DR that assessee does not have proper segmental report, is baseless. 16. We note that the first grievance of the ld DR for the Revenue is that the segment profitability was not part of the audited financial statements of the assessee company. It is pertinent to note that the dispute arising from this segment reporting issue has already been adjudicated by the Coordinate Bench of ITAT in assessee`s own case, vide ITA No. 1799/Kol/2018, order dated 24.04.2019, wherein it was held as follows: 11. We have heard both the parties and perused the mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Delhi - Trib) wherein it was held that segmental results could not be rejected on the ground that the same was not audited. The TPO/DRP was required to examine the segmental results if the same were maintained in the ordinary course of business. On perusal of, inter alia, the aforesaid decisions, the Coordinate Bench Delhi in the matter of CSR Technology (India) (P.) Ltd vs. ACIT (supra) held that the AO/TPO/DRP erred in disregarding the segmental result of the taxpayer by proceeding to consider the margin of the taxpayer at the entity level for the transfer pricing analysis. In view of above judgments of coordinate benches, we note that there was valid reason for non-disclosure of segment reporting in the audited accounts of the assessee company and submission of segment reporting before the TPO. Therefore, the allegation made by the Revenue in this regard needs to be rejected. 12. So far nature of business is concerned, we note that the assessee company was primarily engaged in seven different types of revenue- generating functions such as (i) provision of software development services to AE, (ii) provision of engineering services to unrelated domestic customers, (ii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cost in respect of AE transactions and incurred loss of 60.30% of cost in respect of transactions with non-AEs. The TPO rejected the above working of the assessee. The Tribunal held that the lower authorities were not justified in not excluding profit or loss in respect of domestic transactions for determining the profit declared by the assessee in respect of AE transactions. The Tribunal further held that the lower authorities were not justified in adopting the profit level achieved by the assessee in respect of all its transactions including domestic transactions as the profit level declared in respect of AE transactions. The Tribunal, noted that the rate of profit achieved in other comparable cases were to be compared with profit level declared by the assessee in respect of its AE transactions after excluding domestic transactions. Therefore, on comparing the same, the Tribunal held that the profit level declared by the assessee in respect of its AE transactions was more than the profit level in respect of comparable cases found by the TPO. In the above circumstances, in the considered view of the Tribunal, the lower authorities were not justified in making addition to the inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal transaction [or a specified domestic transaction] entered into with an associated enterprise is computed in relation to costs incurred or sales effected or assets employed or to be employed by the enterprise or having regard to any other relevant base; (ii) the net profit margin realized by the enterprise or by an unrelated enterprise from a comparable uncontrolled transaction or a number of such transactions is computed having regard to the same base; (iii) the net profit margin referred to in sub-clause (ii) arising in comparable uncontrolled transactions is adjusted to take into account the differences, if any, between the international transaction [or the specified domestic transaction] and the comparable uncontrolled transactions, or between the enterprises entering into such transactions, which could materially affect the amount of net profit margin in the open market; (iv) the net profit margin realized by the enterprise and referred to in sub-clause (i) is established to be the same as the net profit margin referred to in sub-clause (iii); (v) the net profit margin thus established is then taken into account to arrive at an arm's length price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that the margin of the international transaction can only be compared with uncontrolled transaction and not otherwise. In the light of the aforesaid decisions, we note that while determining the arm's length nature of the international transaction under the TNMM, the TPO erred in adopting the entity level TNMM approach because the assessee company had undertaken broadly seven different types of revenue generating transactions with varied risks and returns and the provision of software development service to AE was only one of them. The assessee company correctly prepared the segment reporting for the purpose of computing net profit indicator that arose solely from the international transaction under consideration and applied the TNMM only in respect thereof. Hence, we accept the ALP analysis undertaken by the assessee company under the TNMM based on the segment report submitted by the assessee company to the TPO which is duly verified and certified by the independent Statutory Auditor of the assessee company. Therefore, we are of the view that the erroneous benchmarking approach adopted by the TPO needs to be rejected, and therefore, the ground No.1 raised by the Reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... UM.), ( in this case the assessee had adopted TNM method) held as follows: The split financials (i.e. segment report) provided by the assessee was rejected by the TPO on the ground that in allocation of manufacture expenses like employees' remuneration, rent, etc., the allocation key used was sales whereas according to the TPO, the ideal allocation key in the instant case could have been - number of employees, space utilised, etc. It may be noted that space utilised can be selected as an appropriate allocation key for the purpose of allocation of rent because the amount of rent depends on the area used by the tenant and the rent per square feet. Similarly, the electricity consumption in an office and the amount of electricity charge depend on the area covered and price per unit of electricity. In view of this, the assessee company, in the instant case, selected area / space as an appropriate allocation key for dividing the electricity charges between the respective segments. In view of this, we note that there is proper allocation key and the statutory auditor verified and certified in the segment report that out of the total number of employees (154 persons), the AE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce the services rendered by the assessee to the AE are different from the services rendered by the assessee to non-AEs, the assessee determined the arm's length nature of the international transaction under the TNMM based on segmental accounts duly certified and verified by the independent statutory auditor of the assessee dated 11th August 2010 (date of signature of annual financial statements). In the aforesaid segmental accounts, one segment is 'Sales to AE and associated expenses' and the other segment is 'Sales to Non-AEs and associated expenses'. We note that Ld. TPO rejected the segmental accounts and the arm's length analysis undertaken by the assessee based on the segmental accounts under the transaction-by-transaction approach, primarily based on the allegation that the segmental accounts had not formed part of audit report and hence, the same was not reliable. We note that that the Coordinate Benches of ITAT, as explained above, have accepted segmental accounts for the purpose of arm's length analysis of international transactions under the TNMM where the functions performed by the assessee under the AE-segment are different from the functions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of software consultancy services for AY 2009-10 and AY 2010-11. Similarly, in the instant case, the assessee company was engaged in provision of software services to Netguru Inc. USA. Netguru Inc. outsourced the assignments to the assessee company for the previous year relevant to the AY 2010-11. Placing reliance on the aforesaid decision, the CIT(A) rejected Spry Resources India Ltd. Based on the above factual position, we decline to interfere in the order of Ld CIT(A), his order on this issue is hereby accepted. (ii). E-Infochips Bangalore Ltd We note that Coordinate Bench of Kolkata Tribunal in the matter of Labvantage Solutions Pvt. Ltd vs. DCIT reported in [2016] 76 taxmann.com 152 (Kolkata Trib.). wherein it was noted that the assessee was engaged in execution of software development and coding of software services (software services) outsourced to it by its associated enterprise namely, LVS US. The Tribunal rejected E-Infochips Bangalore Ltd as functionally not comparable to the assessee on the ground that the said company was engaged in software development and IT-enabled services and no segmental income break-up was available for the respective segments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Tribunal inter alia held that Thirdware Solutions Ltd could not be accepted as comparable because of the distinguishing features of the functional profile of the company. Thirdware Solutions Ltd was engaged in software product development, implementation and consulting based on ERP and Business Intelligences. In the instant case, the assessee company was engaged in provision of software services to Netguru Inc. USA. Netguru Inc. outsourced the assignment to the assessee company for the previous year relevant to the AY 2010-11. Placing reliance on the aforesaid decision, the CIT(A) rejected Thirdware Solutions Ltd. Based on the above factual position, we decline to interfere in the order of Ld CIT(A) his order on this issue is hereby accepted. (v). Intech Software Pvt Ltd We note that as per paragraph no.12 of schedule 15-Notes to Accounts to the audited financial statements of Inteq Software Pvt Ltd, the said company for the FY 2009-10 was engaged in development of computer software. i.e. production and sale of software. We note that Coordinate Bench of Kolkata Tribunal in the matter of DCIT v. Nomura Research Institute Financial Technologies (P.) Ltd reported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.28% of the total turnover of INR 5,04,12,721/- of the assessee company. The TPO applied the filter namely, 'companies who have less than 75% of the revenue as export sales were excluded.' Assessee has furnished below the aforesaid ratio for Cherrytec Intelisolve Ltd, Cigniti Technologies Ltd and Secure Earth Technologies Ltd: Export turnover to total turnover ratio for Cherrytec Intelisolve Ltd, Cherrytec Intelisolve Ltd and Secure Earth Technologies Ltd. are as under: Cherrytec Intelisolve Ltd (page no. 211 of paper book) INR Export turnover 5,27,70,014 Total turnover 8,94,71,520 Export turnover to total turnover ratio 58.98% Cigniti Technologies Ltd (Chakkilam Infotech Ltd) (page no. 215 and 216 of paper book). INR Export turnover 2,77,00,101 Total turnover 5,05,58,955 Export turnover to total turnover ratio 54.79% Secure E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chnologies Ltd and Secure Earth Technologies Ltd. In this connection, it is pertinent to note that the TPO has not disputed; otherwise functional or FAR (function-asset-risk) comparability between the assessee company and Cherrytec Intelisolve Ltd, Cigniti Technologies Ltd and Secure Earth Technologies Ltd. That being so, we decline to interfere in the order passed by the ld CIT(A), his order on this issue is hereby upheld and ground No.4 raised by the Revenue is dismissed. 24. Ground No. 5 raised by the Revenue reads as under: 5. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in accepting Kireeti Soft Technologies Ltd. even though it failed the employee cost filter applied by the Ld. TPO. 25. We note that the ground No. 5 raised by the Revenue, is directed against the action of the Ld. CIT(A) in accepting Kireeti Soft Technologies Ltd, even though it failed the employee cost filter applied by the TPO. We note that for the A.Y. 2011-12, the CIT(A) accepted Kireeti Soft Technologies Ltd as comparable to the assessee company though the TPO rejected this company by applying the same employee cost filter as that applied for the AY 2010-11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ote that Employee cost filter not being amenable to be used as a filter in the selection or rejection of comparables, for that we rely on the Judgment of the Coordinate Bench of ITAT Hyderabad in the matter of DCIT vs M/s. Hellosoft India Pvt. Ltd reported in ITA No. 645/Hyd/09 wherein it was held as follows: The CIT (A) further held that the employee cost to sale' filter adopted by the TPO is not appropriate as relevant data was not available in respect of all the companies available on the database. Moreover, part of the employee cost was included by certain companies under the different heads like software package cost or operating expenses etc. As a result of which the filter cannot be uniformly and objectively applied for selection of comparables. In. view of the aforesaid, we uphold the decision of the CIT (A) in not sustaining the rejection of comparables selected by the assessee by applying employee cost to sale' filter as relevant data/information for this filter are not available. Moreover, it is also a fact that part of the employee cost is included by many companies under different other heads. In view of the above decision, we note that emp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he TPO has not disputed, otherwise functional or FAR (function-asset-risk) comparability between the assessee company and Kireeti Soft Technologies Ltd. In view of this, we reject the contention of the TPO and accept Kireeti Soft Technologies Ltd as comparable to the assessee company. That being so, we decline to interfere in the order of ld CIT(A) and dismiss the ground No. 5 raised by Revenue. 26. Ground No.6 raised by the Revenue reads as follows: 6. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in accepting Akshay Software Technologies Ltd. even though it is functionally dissimilar to that of the assessee. 27. We note that the ground No. 6 raised by the Revenue is directed against the action of the ld. CIT(A) in accepting Akshay Software Technologies Ltd. Ld. D.R. for the Revenue argued before us that Akshay Software Technologies Ltd. is functionally dissimilar to that of the assessee company, therefore, the ld. CIT(A) ought not to have accepted this company as comparable. We note that for the A.Y. 2011-12, the ld CIT(A) accepted Akshay Software Technologies Ltd, as comparable to the assessee company. The Revenue accepted the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee for AY 2009-10 and AY 2010-11. The relevant extract of the judgment is given below: It is not in dispute that the assessee is engaged in software development. Hence comparable should also be in the companies engaged in the similar sector. We find that the ld. TPO had rejected this comparable on the ground that it provides technical support for integration of SWIFT software to its clients of the user of SWIFT in financial industry. We find from the annual report of this comparable enclosed in the paper book, that it is also engaged in software development activity which is quite evident from the income schedule of the said comparable. We find that the USA based subsidiary of the company i.e. Akshay Software International Inc. (Akshay US) is a registered partner of SWIFT selling SWIFT solutions and products as an extended arm of SWIFT in North America. Thus, the contention of the Id. TPO/ld.AO is erroneous since it is clearly evident from the annual report of the comparable company itself that it is engaged in rendering software development activity only. We find that this comparable i.e Akshay Software Technologies Ltd had been accepted as comparable in IT sector in the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... General Administrative expenses 26,14,027 Depreciation 15,69,658 Interest paid to Banks 95,953 Total Cost 2,72,90,774 Profit before tax 32,90,561 We note that the total revenue of the said company stands at INR 3.05 crore out of which the operational revenue stands at INR 2.83 crore. The cost incurred by the company stands at INR 2.73 crore leading to profit before tax amounting to INR 0.33 crore. Thus, the allegation made by the Revenue that the company has insignificant cost base has no leg to stand. It is also not true that in the case of the aforesaid company, with a small variation in profit, the impact in the profit margin will be very significant. We therefore accept Avani Cincom Technologies Ltd as comparable, and for that we rely on the judgment of the Coordinate Bench of ITAT Hyderabad in the matter of CNO IT Services (India) (P.) Ltd. v. ACIT reported in [2018] 90 taxmann.com 407 (Hyderabad-Trib.). The facts of this company are that this assessee company was engaged in the busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be accepted comparable. We note that for the A.Y. 2011-12, the CIT(A) as well as the TPO accented CAT Technologies Ltd as comparable to the assessee company. The Revenue should follow consistency in his approach and for this we rely on the judgment of the Hon ble High Court of Calcutta in the matter of CIT vs. Britannia Industries Ltd reported in [2003] 132 TAXMAN 16 (CAL.), wherein it is held as follows: The order of the Commissioner (Appeals) in the assessment year 1980-81 had not been challenged by the department. Once the order had been accepted and when the facts were more or less similar in the assessment year at hand, there was no reason to disagree with the view taken by the Tribunal in the relevant assessment year 1979-80. Therefore, we note that if the Revenue accepts the said company as comparable for the AY 2011-12, there is no reason for the Revenue to reject it for the AY 2010-11. We note that Revenue proposed to reject CAT Technologies Ltd solely on the ground that the related party transactions are not disclosed in the annual report. We note that normally a comparable company is rejected if the value of the related party transactions disclosed in the au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 raised by the Revenue is directed against the action of the Ld. CIT(A) in accepting cash profit over sales, even though the assessee is not a capital-intensive industry and as per the Income-tax Act, 1961, read with the Income-tax Rules, 1962, net profit realized needs to be compared. Ld. D.R. argued before us that there is no concept in Transfer Pricing to use cash profit margin ratio as profit level indicators (PLI); hence PLI adopted by the assessee ocmapny should be rejected. We note that the assessee selected cash profit margin on cost as the net profit indicator for the AY 2011-12 on the same facts and circumstances of the case as those for the AY 2010-11. The TPO rejected the aforesaid net profit indicator but the same was accepted by the CIT(A). The Revenue did not take any ground of appeal before the Tribunal against the aforesaid stand taken by the CIT(A) for the AY 2011-12. In this connection, reliance is placed on the decision of the Hon'ble High Court of Calcutta in the matter of CIT vs. Britannia Industries Ltd reported in [2003] 132 TAXMAN 16 (CAL.), wherein it was held as follows: The order of the Commissioner (Appeals) in the assessment year 1980-81 had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the similar facts, the Coordinate Bench of ITAT Kolkata in the matter of DCIT vs. AT S India Private Ltd reported in [2015] 58 taxmann.com 73(Kolkata-Trib.) has confirmed the application of cash profit margin under the TNMM. In the aforesaid case, the assessee selected cash profit margin on sales as the appropriate profit level indicator / net profit indicator under the TNMM. In view of above discussion we accept the cash profit margin ratio as an appropriate profit level indicator(PLI) under the TNMM which places the tested party and comparable companies on equal footing. In the aforesaid decisions, nowhere it is stated that cash profit margin is an appropriate net profit indicator only for a company which operates in capital intensive industry. The cash profit margin ratio is also applicable to other companies, as profit level indicator (PLI) and it is not only restricted to capital intensive industries; that is, it is equally applicable to other industries also. We accept cash profit margin ratio as appropriate profit level indicator (PLI) in the assessee`s case under consideration. That being so, we decline to interfere in the order of ld CIT(A) and dismiss the ground No. 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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