TaxTMI 
TaxTMI 
2013 (9) TMI 304
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.... mentioned in section 92C(3) has been met with by the Transfer Pricing Officer. 2.3 The learned CIT(A) erred in observing that the price quoted by the assessee always correspond to the global price. The learned CIT(A) failed to note that the assessee had not furnished any details regarding the global price. On the other hand the Transfer Pricing Officer had compared the rates of the assessee and that of M/s NewGen and has established that the assessee had charged its associated enterprise at a lower rate than the market rate. 2.4 The learned CIT(A) erred in observing that the Transfer pricing officer ignored the submissions of the assessee with regard to cost plus method and the comparison between the assessee and M/s Kolam Information Services and M/s Qpro Infotech Ltd. It is submitted that the Transfer pricing Officer has clearly observed that comparison of profits between the assessee and its associated enterprise cannot be accepted as cost plus method. Further the Transfer Pricing Officer has pointed out that M/s Kolam Information Services (P.) Ltd. and M/s Qpro infotech Ltd. cannot be treated as comparable companies in view o....
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....ustification to allow the provision claimed by the assessee which is proved in excess by the assessee's own act of reversal of the same in the subsequent year. 6.1 The learned CIT(A) erred in holding that the interest on margin money should be assessed under the head business. 6.2 Having regard to the decision of the jurisdictional High Court in the case of Menon Impex Ltd. (259 ITR 403) the learned CIT(A) ought to have upheld the action of the Assessing Officer. 7. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned CIT(A) may be set aside and that of the Assessing Officer restored." 3. In Ground No.2 of the appeal, the grievance of the Revenue is that the Ld. CIT(A) erred in deleting the addition of Rs. 1,58,59,366/-on account of Arm's Length Price (ALP) u/s 92CA as determined the Transfer Pricing Officer (TPO). 4. The brief facts of the case are that the Assessing Officer, while making the addition on account of adjustments to the ALP determined by the TPO observed as under: "Determination of Arms Length Price u/....
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....ted in the High Labour cost percentage. Further Newgen's finance cost is very high as this depends on the availability of the funds, has to be excluded while comparing the arm's length pricing. Financial result of one year cannot be an indicative figure. This particular year may be an extraordinarily profitable in the case of the company compared and will not represent the normal profit margins representative of the business. Further the goodwill of the other company that may command a higher price will also have to be taken into consideration. Newgen's entire business is underwritten by its Holding company, there is no cost for sales promotion, advertisement and marketing. Normally marketing expenses for such competitive business will be more than 15%. The Arm's length pricing based on the financial results have not considered all these factors. It is not comparing the like with the like and discount has not been given for all non-comparable factors. The Appellant had submitted that their financials are comparable to another similarly situated company viz., Qpro, who is also working for their Holding company, has been rejected by the AO without assigning any reason. Hence the pri....
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....ices charged and paid in such intra-group transactions, thereby, leading to erosion of tax revenues. 55.3 With a view to provide a detailed statutory framework which can lead to computation of reasonable, fair and equitable profits and tax in India, in the case of such multi-national enterprises, the Act has substituted section 92 with a new section, and has introduced new sections 92A to 92F in the Income-tax Act, relating to computation of income from an international transaction having regard to the arm's length price, meaning of associated enterprise, meaning of international transaction, computation of arm's length price, maintenance of information and documents by persons entering into international transactions, furnishing of a report from an accountant by persons entering into international transactions and definitions of certain expressions occurring in the said sections. 55.6 The new provision is intended to ensure that profits taxable in India are not understated (or losses are not overstated) by declaring lower receipts or higher outgoings than those which would have been....
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....y and the Alden Group Ltd., U.K. 6.7 The appellant has inter alia challenged the reference made to the Transfer Pricing Officer and the determination of arm's length price by the Transfer Pricing Officer and the Assessing Officer. The Assessing Officer has with reference to all the transactions reported by the assessee in Form 3CEB made a reference to the Transfer Pricing Officer on 23/11/2005 u/s.92CA(1) of the Income-tax Act, 1961 for determination of the arms length price. 6.8 As per section 92CA(3), the Transfer Pricing Officer shall determine the arm's length price in accordance with sub-section (3) of section 92C Under section 92C(3) the Assessing Officer (in the instant case the TPO) may proceed to determine the arm's length price in relation to the said international transaction in accordance with sub-sections (1) and (2) if he is of the opinion that (a) the price charged or paid in an international transaction has not been determined in accordance with sub-sections(1) and (2) or (b) any information and document relating to ....
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....cer has observed that the assessee company has failed to substantiate the ALP by furnishing the datas of uncontrolled comparable transactions. As stated above, the transactions are in international market and hence comparable and the appellant has maintained proper records of the same. In this context, it becomes necessary to refer to the relevant Regulations here. Rule 10B(2) of the Income-tax Rules, 1962 provides that comparability of an International Transaction with an uncontrolled transaction shall be judged with reference to the following: "(a) the specific characteristics of the property transferred or services provided in either transaction; (b) the functions performed, taking into account assets employed or to be employed and the risks assumed, by the respective parties to the transactions; (c) the contractual terms (whether or not such terms are formal or in writing) of the transactions which lay down explicitly or implicitly how the responsibilities, risks and benefits are to be divided between the respective pa....
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.... circumstance so case - Held yes 2. Whether minimum requirement is to prima facie show that controlled international transaction was properly examined, comparable and Arm's length price fixed objectively, honestly and in a bona fide manner as required by statutory regulations - Held yes 3. Whether Arm's length price is determined by taking result of a comparable transaction in comparable circumstances and by making suitable adjustments for differences - Held yes 4. Whether first step in determination of Arm's Length price is to analyse specific characteristics of controlled transaction whether it relates to transfer of goods, services or intangible and without proper study of specific characteristics of controlled transaction, no meaningful comparison or location of comparable is possible - Held yes 5. Whether if there are material and significant differences in risk involved. then comparables identified are not correct as appropriate adjustments for differences in such cases are not p....
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....as a futile exercise to compare the uncomparables. The TPO however, disregarded these facts and proceeded to hold that the appellant's pricing is lower than the average rate of M/s. New Gen Imaging Systems Pvt. Ltd. and held that the appellant company has lowered its profit margin and has diverted its profit to the parent company. From the material placed on record and on a careful examination of the same, it is found that the learned TPO has erred in attempting to compare the financial statements of the assessee company with those of M/s. New Gen Imaging Systems Pvt. Ltd. because both these companies are uncomparable. 6.12 The objective behind introduction of Transfer Pricing Regulations in India is to curb erosion of taxes by manipulation of prices. However, Circular No. 12 very clearly states that there is a need to ensure that the tax-payers are not put to unnecessary hardship. The appellant company has justified the prices charged by it by way of establishing comparable uncontrolled price for each product in the form of invoices / quotations from unrelated parties. Further, the assessee company has justified the Arm's Length Price by adopting an alter....