ITAT directs AO/TPO on TP adjustments, benchmarking, and comparables in international transactions.

The ITAT partially allowed the appeal, directing the AO/TPO to reconsider benchmarking international transactions using OP/VAE, allow depreciation on goodwill, include/exclude specific comparables, and restrict TP adjustments to international transactions. The ITAT relied on judicial precedents and previous orders in the assessee's case for its decisions.

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Issues Involved:
1. Transfer Pricing Adjustments
2. Depreciation on Goodwill
3. Selection and Rejection of Comparables
4. Restriction of Transfer Pricing Adjustments to International Transactions

Detailed Analysis:

1. Transfer Pricing Adjustments:
- Issue: The Ld. Dispute Resolution Panel (DRP) upheld the action of the Ld. Assessing Officer (AO) and Ld. Transfer Pricing Officer (TPO) in confirming the addition of INR 37,53,73,494/- by holding that the assessee's international transactions in the freight forwarding segment did not satisfy the arm's length principle.
- Analysis: The assessee argued that the TPO disregarded the arm's length price (ALP) and the scientific benchmarking process carried out in the Transfer Pricing (TP) documentation. The TPO used "Operating Profit/Total Cost" (OP/TC) instead of "Operating Profit/Value Added Expenses" (OP/VAE) as the Profit Level Indicator (PLI). The ITAT found that the assessee's business model had not changed and followed the judicial precedent in the assessee's own case for previous years, directing the AO/TPO to adopt OP/VAE for benchmarking the international transactions.

2. Depreciation on Goodwill:
- Issue: The AO did not allow depreciation of Rs. 4,26,46,129/- on the balance of WDV of Rs. 17,05,84,517/- claimed under Section 32 of the IT Act.
- Analysis: The ITAT noted that the claim for depreciation on goodwill had been allowed in the assessee's own case for earlier years (A.Y 2010-11 and 2011-12). Following the judicial precedent, the ITAT directed the AO to allow the claim of depreciation on goodwill.

3. Selection and Rejection of Comparables:
- Inclusion of Comparables:
- Issue: The assessee argued for the inclusion of Hindustan Cargo Ltd. as a comparable, which had been accepted in earlier years but rejected for A.Y 2013-14 due to extraordinary events.
- Analysis: The ITAT directed the TPO to include Hindustan Cargo Ltd. in the determination of ALP, noting that it was functionally comparable and had been accepted in earlier years.
- Exclusion of Comparables:
- Issue: The assessee contested the inclusion of Om Logistics Ltd., arguing it was functionally different.
- Analysis: The ITAT, following its earlier order for A.Y 2010-11, directed the exclusion of Om Logistics Ltd. from the list of comparables, as it had significant assets and was functionally different from the assessee.

4. Restriction of Transfer Pricing Adjustments to International Transactions:
- Issue: The assessee contended that TP adjustments should be restricted to the extent of the value of international transactions undertaken by the assessee.
- Analysis: The ITAT noted that TP adjustments could only be made in respect of international transactions and not transactions with unrelated third parties. The ITAT restored the matter to the AO/TPO for verification, directing that adjustments should be restricted to the extent of international transactions.

Conclusion:
The ITAT partially allowed the appeal for statistical purposes, directing the AO/TPO to reconsider the benchmarking of international transactions using OP/VAE, allow depreciation on goodwill, include and exclude specific comparables as directed, and restrict TP adjustments to international transactions. The ITAT followed judicial precedents and previous orders in the assessee's own case to arrive at its decisions.

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