TaxTMI 
TaxTMI 
2014 (11) TMI 515
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....ware company and 100% export oriented unit set-up to provide computer software/services to its parent company D.E. Shaw India Software P. Ltd., USA and acts as captive software development service provider to its AE. During financial year 2002-03, it provided various services to its AE for which an amount of Rs. 11,73,72,986 was shown to have been received. Assessee selected TNMM method for its T.P. study and stated that its profit margin on cost was within arms length. While doing so, it excluded amount of Rs. 29,44,130 representing irrecoverable amount of expenses receivable from M/s. Juno Online Services P. Ltd., for computing operating profit margin. Assessee arrived at the profit margin at 12% on total cost. TPO however, did not accept....
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....ange of +/- 5%. During the present proceedings, it raised an additional ground on incorrect computation of margin of M/s. e-Star Infotech. Revenue is aggrieved on exclusion of Zen Technologies Ltd., and increasing the risk allowance from 0.5% to 1%. 5. We have heard the Ld. Counsel and Ld. D.R. and perused the paper book placed on record and case law paper book supporting various contentions. In the course of arguments, Ld. Counsel did not press ground No.2 pertaining to assessee's T.P. study and also grounds No. 6, 7 and 8 pertaining to not giving an opportunity by A.O. while accepting the order of TPO. Ground No. 10 is general in nature. The issues are decided as under. RISK ADJUSTMENT : 6. As briefly stated above, A.O. has a....
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....l and coffee, tea etc., expenses on behalf of M/s. Juno Online and has recovered only an amount of Rs. 9,34,444. The balance amount of Rs. 29,44,130 was not recovered and therefore, the operating cost incurred on behalf of Juno Online cannot be considered as operating cost for the services rendered to A.E., since it is a domestic expenditure not connected with assessee's activity. TPO, however, did not accept the contention on the reason that (a) that assessee has not taken any steps to recover the amount (b) that the amount has not been charged to P & L account and (c) on verification from statements of Juno Online Services, there is no such claim of expenses payable to assessee company. Accordingly, TPO did not allow the reduction of ....
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....that domestic transaction with non-AE cannot be considered as operating expenditure in relation to International transactions with AE, as decided by Coordinate Bench in the case of Fore Soft Ltd., 142 TTJ 358 and HSBC Electronic Data Processing India Ltd., ITA.No.76/Hyd/2008. In principle, assessee's contentions are acceptable. 9. However, as seen from the ledger account, copies of which were placed from pages 74 to 90, entire cost incurred from April, 2002 to December/January, 2003 under various heads have been transferred to Juno Online recoveries. The ledger account indicates the total amount spent under various heads is equivalent to the amount transferred to Juno Online. What is the gross expenditure incurred by assessee could n....
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....hat there is no need to make any claim of the statutory provision. In case ALP determined after due analysis is within +/- 5% range as provided in the proviso to section 92C(2) of the I.T. Act. A.O./TPO is bound to give the benefit to the assessee. There is no need to make any separate claim. Since assessee has shown ALP within the range, there is no requirement of making a claim in its T.P. study, we are of the opinion that the Ld. CIT(A) erred in observing that assessee has not made the claim before the TPO. However, this aspect will come into consideration only after determining the ALP by A.O. consequent to the orders of the Ld. CIT(A)/ITAT in assessee's own case in this year. TPO/A.O. is directed to keep this statutory provision in....
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....he TPO order, learned TPO mentions margin on sales of E.Star at 27.24% and margin on cost at 32.82%. However, the basis for arriving at those figures are not available. As seen from the details filed by assessee, operating cost was arrived at Rs. 19.04 crores and operating profit at Rs. 4.81 crores thereby, OP/OC at 25.28%. Since, there is a substantial variation between the margin computed by assessee vis-à-vis computation by TPO, we are of the opinion that this aspect requires re-examination by TPO/A.O. The TPO/A.O. should examine how the margin on cost was arrived at and give an opportunity to assessee to file its objections and then arrive at the correct margin on cost, so as to include the same in arriving at the ALP. Needless t....