TaxTMI 
TaxTMI 
2011 (3) TMI 269
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....aged under the Income-tax Act, 1961 ('Act'). In doing so the ld. DRP has grossly erred in agreeing with the TPO's action of; 2.1 not appreciating the Functions-Asset-Risk ('FAR') profile of the appellant and in modifying the Profit Level Indicator ('PLI') used by the appellant from 'Operating Profit/Value Added Expenses' to 'Operating Profit/Operating Cost' ('OP/OC'), by including the cost of goods sold in the appellant's cost base; 2.2 erroneously considering OP/OC as the PLI despite the fact that the denominator, i.e., 'Operating Costs' used for computation of the said PLI includes appellant's international transaction of purchase of traded goods and spares being 'controlled transactions' thereby ignoring that the use of such PLI is not in conformity with the principles of transfer pricing analysis; 2.3 rejecting the comparable companies for arbitrary reasons which were selected by the appellant in its Transfer Pricing documentation based on a detailed FAR analysis; 2.4 arbitrarily accepting two out of three companies selected in the TP order for the immediate previous assessment year (AY 2005-06) for comparison with the appellant; ....
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....g to Rs.673,298 (out of the total disallowance of Rs.2,087,932) by wrongly treating the same as part of demonstration inventory written off; 3.3 without prejudice, in not allowing the depreciation on demonstration inventory and other inventory even though holding it as capital expenditure and alternatively not allowing the same on deferred basis." 2. As per ground No. 1, the ld. DRP has not passed a speaking order. The order under section 144C of the Income-tax Act was passed by the DRP on 29-4-2010 upholding the order of the TPO and the adjustment of Rs.10,62,21,565 to the income of the assessee. The assessee had raised objections before the DRP. These objections were dealt with by the DRP. The first objection raised by the assessee was that OP/VAE was a valid PLI based on the Functions-Asset-Risk ("FAR") profile of the assessee. The DRP observed that Rule 10B of the Income-tax Rules, 1962 specifies as to what can be considered as a PLI and that as such, the objection of the assessee could not be accepted. The next objection of the assessee before the DRP was that comparables submitted in the TP documentation had been arbitrarily rejected and that comparables u....
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....proposed adjustments to the sales facilitation transaction of the assessee. The TPO has rejected OP/VAE as the Profit Level Indicator (PLI) relying on Rule 10B of the Income-tax Rules, 1962. As per this Rule, what can be taken as PLI is clearly mentioned in view of this the objections raised by the assessee cannot be accepted and we see no reasons to interfere with the order of the TPO. The TPO rejected the comparable companies used by the assessee based on a detailed FAR analysis as mentioned in the order. Furthermore, he undertook a search of comparables and took two companies which were used as comparables in the immediate preceding year. The assessee has objected to the inclusion of the new comparables as well. However, the TPO order is sufficiently clear on the issue of rejection of the comparables used by the assessee as well as reasons for introduction of new companies as comparables. In view of this there is no merit seen in the argument of the assessee and therefore, we do not interfere in this matter. The TPO has taken the current year data which is again objected by the assessee. As per the provisions of law, it is mandated that only the current year ....
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....ocumentation; that the DRP erred in failing to give a reasonable opportunity to the assessee to refute the basis on which the adjustment had been made by the TPO in the TP order and in not considering the arguments and evidence brought on the file by the assessee and not disclosing the information/documents/analysis carried out by the TPO on the basis on which, the ALP was determined in the TP order; that the DRP erred in denying the benefit of (+/-5 per cent) available to the assessee as per the proviso to section 92C(2) of the Act; and that the DRP erred in upholding the disallowance of actual inventory written off, amounting to Rs.20,87,932 by treating the same as capital in nature, even though the write off inventory arose in the normal course of the business of the assessee due to which, it was on revenue account. 5. The record shows that the assessee had filed before the DRP, along with its objection, the facts as submitted to the Assessing Officer concerning the TP adjustment and the corporate tax disallowance, factual and legal arguments against the addition proposed by the Assessing Officer concerning the TP adjustment and the corporate tax disallowance and the c....