TaxTMI 
TaxTMI 
2009 (3) TMI 637
X X X X Extracts X X X X
X X X X Extracts X X X X
....of providing call centre/IT enabled services to the customers of the American holding company. During the year under consideration, it had entered into international transactions to the tune of Rs. 15,95,13,613 with its associate enterprise viz. Customer Services, USA. Since the said transactions were of the value of more than Rs. 5 crores, a reference under section 92CA(1) was made by the Assessing Officer to the Transfer Pricing Officer (TPO) to determine arm's length price in respect of the said international transactions with associate enterprise. Vide its detailed order passed under section 92CA(3) on 31-3-2004, the value in respect of the said international transactions entered into by the assessee-company with M/s. Customer Services, USA at arms' length price was determined by the TPO at Rs. 17,47,25,470 which was subsequently reduced to Rs. 17,18,97,693 by way of a rectification order passed under section 154 on 21-3-2004. On the basis of the said value determined by the TPO, addition of Rs. 1,23,84,080 (Rs. 17,18,97,693 - Rs. 15,95,13,613) was made by the Assessing Officer to the income returned by the assessee at a loss of Rs. 1,17,68,706 by way of transfer pricing adjust....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ddition on merits may be taken as not pressed by the assessee. The said grounds are accordingly dismissed as not pressed. 7. The relief sought by the learned counsel for the assessee in respect of issues raised in ground No. 10 relating to charging of interest under sections 234B and 234C is only consequential. The Assessing Officer is accordingly directed to allow consequential relief to the assessee on these issues. 8. Now, we shall take up the appeal of the revenue wherein the following solitary ground is raised :- "On the facts and in the circumstances of the case, the ld. CIT(A) has erred in law by accepting the raw data provided by the assessee without carrying out a proper study of the comparables and a FAR (Function, Assets, Risk) analysis of the same for the relevant financial year in accordance with the provisions of Rule 10B(2) and (3)." 9. At the time of hearing before us, the learned DR has submitted that although the ground raised by the revenue in this appeal is not happily worded, the grievance sought to be projected therein as arising from the impugned order of the learned CIT(A) is that the learned CIT(A) has erred in holding that TPO was not justified in usin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....any justification for not using current year's data as per Rule 10B(4), he has also not given any reason for invoking proviso to the said sub-rule. He has not given any reason as to why it is proper to consider earlier years' data and how those years' data reveals facts which could have an influence on fixing the arm's length price for the current year. (vi)The TPO has clearly erred in law and on facts in deliberately not using the current year's data relating to the comparable set of cases for the purpose of fixing the arm's length price for the current year. (vii)The TPO ignored the detailed working of OP/TC ratios for the comparables using the current financial year data without making any comment for discarding the same. Computation of operating margins submitted to the TPO by the appellant (Table 5) is reproduced below :- Table-5 S. No. Name of the company F.Y. 2002-03 Without W/C adjustment Post W/C adjustment 1. AMI Computers (I) Limited (55.43) (64.63) 2. Nucleus Netsoft & Gis India Limited (16.67) 15.37 3. Ace Software Exports Limited 15.59 15.38 4. MCS Limited 15.86 (14.56) 5. Vans Information Limited (61.48) (59.96) 6. Hinduj....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a higher degree of comparability of uncontrolled transactions for arriving at reliable ALP in respect of the international transaction. The importance of contemporary economic and market conditions on price setting mechanisms is also reflected in the provisions of Rule 10B(3) of the Rules. The setting up of a price is after all a business decision in an open market transaction, prices are set by contemporary economic realities of demand, supply, market structure and other relevant factors. Therefore, ex-ante documentation using contemporaneous data used at the time of setting the price is the most appropriate way of supporting the transfer prices between the associated enterprises. However, the TP regulations also allow for documentation on the basis of ex-post analysis to supplement the ex-ante documentation, for justifying the prices already set at the time of the transaction. Nonetheless, ex-ante documentation is primary and ex-post documentation is supplementary in nature. 7.6 The OECD Guidelines in para 1.49 to 1.51 have acknowledged the use of multiple year data under special circumstances. Use of multiple year data is considered useful to smooth out the fluctuations caused ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Act. 7.9 The TPO is empowered to determine the ALP by using the current financial year data available at the time of transfer pricing proceedings and to conduct the comparability analysis by using such data. As it is mandatory and absolute requirement of law to use the current financial year data, the TPO not only has the power but is also duty bound to determine ALP by using the current financial year data in the comparability analysis, even if such data was not available to the appellant in the public database at the time of preparation of the TP report. The observations made by the Hon'ble Supreme Court in the case of CIT v. British Paints India Ltd. reported in 188 ITR 44 that it is not only the right but the duty of the Assessing Officer, to act in exercise of his statutory power, for determining, what in his opinion, is the correct taxable income, relevant under the current situation as well. 7.10 The TPO has not brought on record any cogent, relevant and reliable evidence to prove that the data for preceding two years revealed facts, which could have an influence on the determination of ALP. The existence of any product/economic/business cycle affecting the performanc....