TaxTMI 
TaxTMI 
2011 (3) TMI 860
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.... the same was allowable at 15% only. The grounds of appeal read as under:- "Based on the facts and circumstances of the case, Geodis Overseas Private Limited (hereinafter referred to as "the Appellant"), respectfully submits with respect of the order passed by the ld. DCIT, Circle 12(1), New Delhi (AO) u/s. 143(3)/144C of the Income Tax Act, 1961 (hereinafter referred to as the "Act") appeal on the following grounds: 1. The ld. Assessing Officer ("AO") based on the directions received from ld. Dispute Resolution Panel (DRP) has erred in law and on facts, in upholding the adjustment in its entirety to the transfer price made by the ld. Transfer Pricing Officer (TPO). 2. The ld. AO/DRP/TPO has erred, in law and on facts by making an adjustment of Rs.69,792,811 to the income of the appellant and in holding that the transactions between the appellant and its associated enterprise were not at an arm's length price. 3. That the ld. DRP has erred in overlooking the submissions made by the Appellant to the DRP, thus, not providing an equal opportunity of being heard to the appellant. The ld. DRP has consequently erred in ignoring the argument of the ....
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....er peripherals, Printers and UPS. 14. The ld. AO has erred in law in the adjustment on account of depreciation without providing an opportunity of being heard to the appellant. No discussion was undertaken with the appellant with respect to this adjustment during the course of assessment proceedings. 15. The ld. Collegium of Commissioner's comprising the DRP erred in law and on facts, by not adhering to the principles of natural justice by summarily rejecting the appellant's objections and disregarding the material placed on records. That the procedure laid down in sec. 144C(5), 144C(6) and 144C(7) has not been followed. 16. The ld. AO has erred, in law and on facts, in initiating penalty proceedings with respect to Transfer Pricing additions, claim of brought forward loss and excess depreciation. 17. The ld. AO has erred, in law and on facts, in charging interest under sections 234B and 234D of the Act. The above grounds are independent and without prejudice to each other. The Appellant prays for leave to add, alter, amend any/or modify any of the grounds of appeal at or before the hearing of the appeal." 2. The....
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....nt claimed in respect of international transaction on account of capacity utilization, fixed assets and working capital adjustment. 3.4. Ground Nos. 7 and 10 represent the grievances of the assessee regarding non-appreciation of business modalities of its business by the TPO/DRP as a result of which proper adjustment has not been granted. 3.5. Ground No. 8 is regarding user of multiple year data of comparables to arrive at mean margin of comparables. 3.6. Ground No. 9 is regarding grant of benefit of 5% range. 3.7. Ground No. 11 express the grievance regarding non-grant of adequate opportunity by the TPO. 3.8. Ground Nos. 12, 13 and 14 are against disallowance of depreciation amounting to Rs.16,057 3.9. Ground No. 15 represent the grievance of the assessee against violation of principles of natural justice by DRP. 3.10. Ground No. 16 assails the initiation of penalty proceedings. 3.11. Ground No. 17 assails charging of interest under sections 234B and 234D. 4. The assessee is a domestic company having 94.03% equity holding with Geodis Asia and 5.97% equity holding with INDEV Shipping Services.....
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....4,723 Net Profit(c) = (A) - (B) 3,327,694 NPM (%) (C)/(A)+100 0.34% 6. Observing the difference in figures, the TPO issued the show cause notice to the assessee to explain as to why the actual figures should not be taken against the notional figures. The assessee inter alia submitted that according to the guidelines of OECD capacity utilisation adjustment was required to be effected and, therefore, the assessee has computed its net profit margin in the transfer pricing study at 4.95%. Certain other reasons were also given which have been dealt with in length by the TPO in his order. The TPO after analyzing the provisions, the contentions of the assessee and the relevant case law has come to the conclusion that the actual data of the assessee was to be taken into consideration and he rejected the claim of the assessee that the figures of sales, etc. should be taken after the so called capacity utilisation adjustment. 7. So far as it relates to the issue regarding transfer pricing adjustment, the assessee had calculated arithmetical means on the basis of 16 comparable parties which are described as below in the order of the TPO at page 80 of the paper book. &....
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....manner, he has rejected the said claim of the assessee and has computed the arm's length price by taking net profit margin ratio at 7.53%. The operational income of the assessee has been taken as per figure in the books of account which is a sum of Rs.97,10,55,854 on which arm's length profit has been determined at Rs.7,31,20,505. After reducing the operating profit of Rs.33,27,694 therefrom, the difference has been calculated by the TPO at Rs.6,97,92,811 which has been added to the income of the assessee on account of difference between the arm's length profit and the operating profit of the assessee. He rejected the claim of the assessee regarding 5% adjustment on account of application of proviso to section 92C (2) as, according to learned TPO, the difference in the arm's length price is more than 5%. In this manner, the TPO has arrived at a conclusion that international transaction of the assessee is to be adjusted by a sum of Rs.6,97,92,811. Accordingly, the said addition was made by the Assessing Officer and has been upheld by the DRP as per order reproduced in the above part of this order. 10. On the basis of arguments submitted by both the parties, the issues on w....
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.... (x) The initiation of penalty proceedings is wrong. (xi) The charging of interest u/s. 234B and 234D is wrong. Regarding rejection of objections by DRP by way of non-speaking order. 11. The DRP has vast powers to examine the matter placed before it and such position of law has been described in the process laid out in section 144C. Under sub-section (1) of section 144C, the Assessing Officer is under an obligation to forward a draft of the proposed order of assessment to the assessee if he proposes to make, on or after the first day of October, 2009, any variation in the income or loss returned which is prejudicial to the interest of such assessee. Under sub-section (2) of section 144, the assessee within 30 days of the receipt of such draft order can accept the variation made by the Assessing Officer or he can file objections either to Dispute Resolution Panel or to the Assessing Officer. Since the assessee had filed his objections with DRP, then, under sub-section (5) the DRP, upon receipt of objection is under obligation to issue directions as it thinks fit for the guidance of the Assessing Officer to enable him to complete the assessment ....
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.... this writ petition, the petitioner has prayed for issue of a writ of certiorari for quashment of the order dated 30th September, 2010 passed by the dispute resolution panel-II, the first respondent herein. What could have been a matter of debate was put to rest by Mr. Sanjeev Sabharwal, ld. Counsel for the revenue by stating that the order passed on 30th September, 2010, contained in Annexure-P1, deserves to be quashed and the matter be remanded to the said authority for fresh adjudication. In view of the aforesaid fair concession, the order dated 30th September, 2010 passed by the respondent No. 1 is quashed and the matter is remanded to the said respondent to adjudicate afresh. Be it noted, when a quasi judicial authority deals with a list, it is obligatory on its part to ascribe cogent and germane reasons as the same is the heard and soul of the matter and further, the same also facilitates appreciation when the order is called in question before the superior forum. Needless to say that the competent authority, while passing the order, shall keep in mind the order dated 29th November, 2010 wherein we had directed that the period from the date of filing the write petit....
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.... (b) The assessee has noted lower return rate of 55% at footnote of page 8 of reply dated 19.2.09, however, basis of computing return rate of 55% is not disclosed. This clearly proves that the assumption is not based on credible basis. (c) In the annual audited report no data of capacity utilization is mentioned. (d) Under the existing transfer pricing regulation disclosed net operating margin or loss gets benchmarked under TNMM. However, in this case, the assessee has computed hypothetical net operating margin on the basis of hypothetical sale i.e., as against disclosed sale of Rs.97.10 crore in audited financials, the assessee had assumed sale of Rs.154.57 crore in order to computed net operating margin. 15. The assessee has supported this issue on the basis of submissions made by it before the TPO and has justified its move to claim the net profit margin at 4.95% on the basis of aforementioned assumed full capacity utilization. 16. As against that, apart from relying on the reasoning recorded by the TPO for rejection of such claim of the assessee, learned DR has drawn our attention towards the provisions of Rule 10B(1)(e)(i) which....
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.... contention of the assessee with regard to consideration of its net profit margin at 4.95% has been rejected. The net profit margin of the assessee has rightly been taken as net operating profit based on audited financials. Whether only turnover relating to international transactions with associate enterprises is only to be considered for arriving at the difference between arm's length price taken by the assessee and computed by the Assessing Officer. 19. After hearing both the parties, we have found that though this issue is not found place in the order of the TPO, but the assessee while filing the objection before the DRP has specifically taken such objection vide letter dated 31st May, 2010 a copy of which is placed at page 16-18 of the paper book wherein it has been specifically stated by the assessee that the difference in the arm's length price should have been only with respect to international transactions of the assessee which are restricted to Rs.20,39,25,826 out of total sales of Rs.97,10,55,854. DRP has not given any specific finding on such submission of the assessee. Section 92C authorize the department to compute the arm's length price only in rel....
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....p; 21. Sub-rule (4) of Rule 10B clearly state that the data to be used in analyzing the comparability of uncontrolled transaction with an international transaction shall be the data relating to the financial year in which the international transaction has been entered into. The proviso carves out an exception that the data relating to a period not being more than two years prior to such financial year may also be considered if such data reveals facts which could have an influence on the determination of transfer price in relation to transactions being compared. Thus, according to the law, the data relating to relevant financial year is only the contemporaneous data and the proviso is applicable only in some specified conditions. No material has been brought on record by the assessee to suggest that there were circumstances prevailing for application of proviso. Apart from this, learned TPO while rejecting the claim of the assessee has relied upon the Special Bench decision in the case of Aztec Software and Technology Services Ltd. (2007) 294 ITR (AT) 32 and the decisions of Delhi Tribunal in the cases of Mentor Graphics Pvt. Ltd. (2007) 109 ITD 101 and Customer Services India (P....
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....hat the financial data of those two companies were available on the date when the TPO has framed the order. He submitted that the financial data of these two companies for relevant year could be produced by the assessee before the DRP only in the shape of additional evidence for which the permission to admit such evidence was required to be given by the DRP. He submitted that the assessee did not make any request for seeking permission to submit the financial data of current financial year of these two concerns. He submitted that according to Rule 9 of Income-tax (Dispute Resolution Panel) Rules, 2009, additional evidence could not be submitted unless the said evidence is called upon by the Panel by deeming it necessary to be furnished or permitted to be submitted. He submitted that even before the Tribunal, no request has been made for admission of these documents and, therefore, current financial data of these companies should not be admitted. He submitted that the assessee is precluded from doing so and if the assessee is permitted to do so, then, there will be no end to the proceedings which may linger on for infinite time. 25. We have heard both the parties on this i....
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....tion of India. 27. According to the assessee, Transport Corporation of India does not have negative worth as has been held by the TPO. This objection of the assessee was required to be dealt with by the DRP. With regard to this issue the assessee has submitted before the DRP vide aforementioned letter dated 21st May, 2010 that the net worth of the Transport Corporation of India was Rs.103.76 crores and to support such contention documentary evidence was also filed:- Learned Transfer Pricing Officer (TPO) has rejected one of the comparables namely. Transport Corporation of India Limited on account of negative net worth. In this regard, it is submitted that as on March 31,2006, the net worth of Transport Corporation of India was 103.76 crores (back up document is being attached as Annexure 1). 28. In this view of the situation, as the issue raised by the assessee before DRP has not been dealt with, we restore this issue to the file of DRP with a direction to adjudicate the same as per law after giving the assessee a reasonable opportunity of hearing. The issue regarding adjustment of 5% as standard deduction. 29. It is seen that befor....