TaxTMI 
TaxTMI 
2014 (1) TMI 438
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....ver, at the outset, submitted that he is not pressing the averments made in paras 2 to 2.5 of the present miscellaneous application. 3. Referring to ground No. 4.2 raised with regard to adjustment to be allowed due to the difference in the rates of depreciation, and taking support from ground No. 8.4 which is an omnibus ground craving leave to add any grounds of appeal not specifically raised under any of the other grounds, it is submitted that ground No. 8.4 covers the ground raised by the assessee relating to rejection of one of the comparable company, viz., Visual Soft Technologies Ltd. as comparable for software development segment of the assessee as it had significant research and development expenses in excess of 3 per cent. of revenues (3.89 per cent. of the revenues) and hence not comparable to the assessee. The said ground was raised and argued at length in the course of the hearing. It is submitted that the aforesaid grounds relating to allowability of an adjustment due to difference in rates of depreciation charged by the assessee on its assets visa-vis rates charged by the comparable companies and rejection of one of the comparables on the basis that it expended resear....
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....ntained in rule 10B(2)(b) which require adjustments to be made for "risks assumed". This, according to him, constitutes a mistake apparent from the record. 5. The learned authorised representative ultimately submitted that the order of the Tribunal dated July 22, 2011 in so far as it disposed of, grounds No. 1.1 ; 4.2 ; 4.3 ; and 8.4 of the assessee, be recalled and an opportunity of being heard on these issues be provided to the assessee, and these issues be disposed of, after dealing with the submissions of the assessee. 6. The learned Departmental representative, on the contrary, strongly supported the order of the Tribunal, and submitted that there is no mistake apparent from record, and the assessee is merely seeking a rehearing on the issues involved and fresh appraisal of the matter, simply because the earlier order of the Tribunal was against it and not acceptable to it. 7. We considered the rival submissions in the light of the order of this Tribunal dated July 22, 2011 and the elaborate contentions of the assessee made in the present application. The issues that came up for adjudication by the Tribunal are as follows : (a) Difference in the rates of the depreciation o....
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....n of the average margins. We are unable to accept the above contention. In the first place, these are initial years of implementation of the transfer pricing legislation in India and taxpayers as well as tax consultants were not fully conversant with this new branch of law when proceedings were initiated or even at appellate stage. Besides, the Revenue authorities, including the Transfer Pricing Officer were required to apply statutory provisions and consider for purposes of comparison functions, assets and risks (turnover), profit and technology employed by the tested party and other enterprises taken as comparable. Statutory duty is cast on them, to undertake the above exercise. This has not been done to this case. We would only say that prima facie, as per the material, to which reference has been drawn by Shri Aggarwal, Datamatics does not appear to be comparable. Even if the taxpayer or its counsel had taken Datamatics as comparable in its transfer pricing audit, the taxpayer is entitled to point out to the Tribunal that the above enterprise has wrongly been taken as comparable. In fact there are vast differences between the tested party and the Datamatics. The case of Datamat....
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....bout the applicability or otherwise of the said decision to the facts of the case. So far as the issue of depreciation is concerned, the Tribunal has simply rejected it only on the ground that the same was not raised either before the Commissioner of Income-tax (Appeals) or before the Transfer Pricing Officer. With regard to the second issue also, the Tribunal rejected the contention of the assessee basically on the ground that the assessee has agreed before the Transfer Pricing Officer that Visual Soft Technology is an unrelated party and its performance can be compared with that of the assessee. 9. In Quark Systems P. Ltd. [2010] 4 ITR (Trib) 606 (Chandigarh), the Special Bench of the Tribunal, as noted above, has held that since transfer pricing is a new concept and the taxpayers and tax consultants were not fully conversant with this new branch of law, when proceedings were initiated or even at the appellate stage, and the further fact, that the Revenue authorities including the Transfer Pricing Officer were required to apply the statutory provisions, and consider for purposes of comparison, concerns, assets and risks, profit and technology employed by the tested parties and o....