TaxTMI 
TaxTMI 
2012 (8) TMI 256
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....ion has been correctly done by the TPO. The Ld. Commissioner of Income Tax (Appeals) has also erred in adopting the arm's length margin at +-5% of the arm's length. (3) The appellant craves leave to add, to alter, or amend any grounds of the appeal raised above at the time of the hearing. 3. The issues raised in the Assessee's Cross Objection read as under:- "(i) That the Ld. Commissioner of Income Tax (Appeals)-XX, New Delhi erred in not holding the order passed by the DCIT, Circle 6(1), New Delhi and the Addl. Commissioner of Income Tax - Transfer Pricing Officer-II, New Delhi as being contrary to the facts and law. (ii) That the Ld. Commissioner of Income Tax (Appeals) erred in law in not holding that the Assessing Officer did not meet the preconditions for making reference to the TPO under section 92CA(1) of the Act and in not providing an opportunity of being heard to the Respondent before referring the transfer pricing issues to the TPO. (iii) That the Ld. Commissioner of Income Tax (Appeals) erred in law in not holding that the Assessing Officer did not pass a speaking order with respect to the submissions made by the Respondent before ....
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....gy adopted was as follows: S .No. Name of transactions Value of transactions (in rupees) Method used 1. Import of finished goods 85,893,802 TNMM 2. Receipt of technical services 77,945 TNMM 3. Provision of man power hiring and other services 27,778,191 TNMM 4.2 A reference was made by the Assessing Officer under section 92CA(1) of the Act to the TPO for computation of arm's length price in respect of the above mentioned transactions. The TPO accepted the transactions at S. Nos. 2 and 3 of the above Table to be at Arm's Length. However, in respect of the item at S.No. 1, namely, import of finished goods. The appellant used the adjusted profit computed in relation to the sales affected as the appropriate PLI. For selecting the adjusted profit as an appropriate PLI, the assessee has stated the following reasons:- - The function of the tested party is similar to value added trader. - The comparables chosen though does not deal with similar item but we have retained the companies on the basis of similarity in functions and risks based on the various ratio analysis. - The ....
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....or heavy start up costs incurred by the assessee as against comparables and adjustments to account for the same, Ld. Commissioner of Income Tax (Appeals) found that three major expenses i.e. travelling and conveyance, legal and professional charges and communication expenses accounted for 50% of administrative and other expenses. Assessee was further asked to furnish the details of these expenses. Ld. Commissioner of Income Tax (Appeals) held as under:- "As regards the assessee's plea that he was a new entrant and there were heavy start up costs and there was overall decline in profits in telecommunication industry which has resulted in incurring losses by the assessee vis-a-vis other comparable is concerned and therefore suitable adjustment is warranted, it is stated that the taxpayer and the comparables selected by the assessee are operating the same economic environment and if the overall industry is facing the downtrend then margins of all the comparables within the industry are effect and therefore no separate adjustment can be given to the assessee." With regard to adjustment on account of start up costs is concerned, I have gone through the assessee submissions and ....
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....167 Legal and professional 28,36,159 Total = 1,62,26,866 30 percent adjustment (as discussed above (D) 48,68,060 Revised operating profit of appellant (E) = (C) - (D) - 1,16,47,965 Difference between arm's length margin and actual margin (F) = (D) - (B) 1,59,723 Value of international transaction 8,58,93,802 Arm's length value of international transaction 8,57,34,079 + 5% of Arms's length price 9,00,20,783 Since the transfer price charged to the assessee by the AEs fall within the +-5% range, I hold the assessee's international transactions with AEs during the year at arm's length." 7. Against the above order the Revenue has filed its appeal and assessee has filed its cross objection. 8. We have heard both the counsel and perused the records. 9. Ld. Departmental Representative submitted the objections in this regard as under:- "At the outset it is submitted that Ld CIT (A) asked the assessee to file details of expenses incurred on account of traveling and conveyance profession....
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.... party in TP Study/ documentation. There is no dispute with the assessee. The above stand is supported by following decisions of ITAT. 1. Haworth (India) Pvt. Ltd, 2011-TII-64-ITAT-DEL-TP Para 83-86 of ITAT order - ITA No. 5341/D/2010 A.Y. 2006-07 (Page-59) Page 5 of head notes para 3. 2. Global Vendtage 37-SOL-I Para 14 - Para 5.4.4 of CIT (A) is quoted 2010-TIOL-24-ITA Part of Para 148 Wherein it was hold no adjustment to be made to tested party. 3. Geodis Overseas 2010-TII-35-Del-TP Para 16-18 of ITAT order 45-SOT-375 It has also submitted that assessee company had not claimed any adjustment on account of specified expense in the Transfer Pricing Study or documentation prepared under rule 10D r.w. section 92D of IT Act. The assessee has not stated as to what was reasons of incurring huge expenditure, vis-a-vis other comparable. It is possible that Assessee Company may have obtained some other advantage of savings under other head. As such details in respect of other compa....