TaxTMI 
TaxTMI 
2014 (12) TMI 803
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....d by the assessee. 1.3 The Hon'ble DRP / ld. AO and ld TPO erred in accepting the Micro Inks Ltd. for the financial year 2005-06 while recomputing the margins for single year. 1.4 The Hon'ble DRP / ld. AO and ld TPO has wrongly computed the margins of the comparables selected in the impugned order. 1.5 The Hon'ble DRP / ld. AO and ld TPO has erred in facts and circumstances by excluding the working capital adjustment while re-computing the operating margins of the comparable companies. 1.6 The Hon'ble DRP / ld. AO and ld TPO has erred in using the data which was not available to the assessee at the time of undertaking the transfer pricing documentation. 1.7 The Hon'ble DRP / ld. AO and ld TPO has adopted a flawed approach by using single year data as against multiple year data used by the assessee in accordance with the law to compute the margins of the comparable companies. 2. The Hon'ble DRP / ld. AO and ld TPO has erred in law in not applying the proviso to Section 92C of the Act and has failed to allow the assessee the benefit of downward variation of 5 percent from the al so determined for the impugned international transaction. 3. ....
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.... ''8.9 General principles emerging from the above discussions: Various principles regarding comparability adjustment as laid down in above referred to judgments may be summarized as under: (a) Rule 10B (e)(ii) and 10B (3)(iii) stipulate for comparability adjustment. (b) The OECD existing guidelines and the OECD draft issue notes on comparability public invitation to comment on a series of draft issue [CPTA/CFA(2006)31] may be relied upon to make comparability adjustment. (c) The comparability adjustment can be made for working capital, risk and growth and R&D expense. (d) Rule 10B(3)(ii) provides for only reasonable accurate adjustment. (e) As per OECD draft issue notes quality of data being adjustment, purpose of the adjustment, reliability of the adjustment and documentation are essential per requirement before any comparability adjustment could be made. (f) Hon'ble ITAT in case of Sony India Pvt. Ltd. (supra) and M/s Philips Software Pvt Ltd(supra) has allowed adhoc or flat comparability however, Hon'ble Karnataka High Court has stayed operation of the order in case of M/s Philips Software Center Pvt. Ltd. On the plea of the department that rule 10B(3)(iii)....
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....the assessee had informed that the margins of the comparables have been calculated by it, and the results thereof were found to be different from the calculation given by the TPO. In this regard, it is clarified that the T.P.O, has followed the same parameters for computation of margin as has been given in the T.P. Study. Nor has the assessee given the calculation for the comparison. In these circumstances, the margin calculated in the show-cause notice is not changed. 10. Applicability of + (-) 5% Range: The assessee has contended that in case adjustment is made by taking the ALP different from the value of international transaction benefit of 5% margin should be allowed to it, which means the difference in excess of 5% margin should only be considered for adjustment. However, this contention of the assessee is not acceptable. The 5% margin is allowed to the assessee at the time of T.P. documentation. If the price determined by the assessee is within 5% of the value of international transactions, then the assessee's value is acceptable. However, once the price is beyond the 5% range, the entire difference has to be adjusted. As has been discussed in detail, the new set....
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.... 115JB of Rs. 40781284/-. Issue demand notice and challan.As the MAT payable on the book profit u/s 115JB declared at Rs. 40781284/- is more than the tax payable under the regular procedure on total income of Rs. 4519070/-, the same is adopted for taxation purposes. Charge MAT on book profit u/s 115JB declared at Rs. 40781284/-. Charge interest u/s 234B, 234C of the Act 1961. Penalty proceedings u/s 271(1)( c) are being initiated separately for concealing income of true income and furnishing of inaccurate particulars of income.'' 2.4 A perusal of the computation of income of the AO will show that book profit as computed u/s 115JB by assessee and AO remains the same. Aggrieved upon the TP adjustments of Rs. 1,37,84,604/- on AE transactions, the assessee is before us. 2.5 The ld. Counsel for the assessee contended that following six comparables included by the assessee in its TP report have been rejected by the TPO without any justification Company Name Unadjusted margins Appellant's objections on TPO's action Atul Limited -1.46 For the purpose of our analysis in the transfer pricing documentation, the appellant has considered 'colours' segment....
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....jection on TPO's action Asahi Songwon Colours Ltd. 16.62 Not in search: This company was not available in the search results carried out by the Appellant at the time of preparation of transfer pricing documentation. The learned TPO has not provided any valid justification as to how this company was identified as comparable when it did not appear in the search undertaken by the Appellant. The learned TPO has not rejected the search process or the parameters/filters utilized by the Appellant in undertaking the search process. Dynemic Products Ltd. 17.01 Food Colour: The company is engaged in manufacture of dye intermediate and various types of food colours. The aim of the company is to support and train constantly food industry in the correct selection and application of colours and to explore new applications of the colours. The products of the Appellant are not in the category of food colours. The Appellant in the transfer pricing documentation has rejected all food colour companies. Rejected by learned CIT(A) in A.Y. 2007-08. Indian Toners & Developers Ltd. (ITDL) 16.51 Toner: Hon'ble ITAT in A.Y. 2005-06 and learned CIT(A) in A.Y. 2005-06 and A.....
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.... 721) (2008) (Banglore ITAT). 5. Honeywell Automation India Ltd. (ITA No. 4/PN/08) (2009) Pune ITAT). 6. Quark Systems Pvt. Ltd. (132 TTJ 1) (2009) (Pune ITAT). 7. DCIT Vs. BP India Services P. Ltd. (TS-568-ITAT-2011) Mumbai ITAT). 8. Vertex Customer Services India (P) Ltd. (ITA No. 1506/Del/2008) (2008) (Delhi ITAT). 9. Global Vantedge (P) Ltd. (37 SOT 1) (2009) (Delhi ITAT). 10. Skoda Auto India (P) Ltd. Vs. ACIT (2009 30 SOT 319) (Pune ITAT). 11. Teva India Pvt. Ltd. (ITA No. 6107/Mum/2009) (2009) (Mumbai ITAT). 2.9 The ld. DR supported the order of the TPO, AO and DRP and relied on the same written submission as filed in assessment year 2007-08. 2.10 We have heard the rival contentions and perused the materials available on record. We find that ITAT Jaipur Bench for assessment year 2005-06 allowed relief to the assessee by following observations. 21. After considering the rival submissions and perusing the material on record and taking into consideration other material on which reliance has been placed by respective parties, we noted that TPO has made addition of Rs. 1,45,52,530/- by adopting mean profit @ 6.5% of total revenue receipts shown by as....
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.... the facts of both these companies. In our view, a broad view has to be adopted and if the broad view is taken then we see no unreasonableness in the findings of ld. CIT (A). 22. The other company i.e. M/s. Indian Toners and Developers Ltd., the assessee claimed that the company manufactures toners and developers for photocopies, laser printers and digital printers. The same was not considered by the assessee to be comparable to the printing inks manufactured by assessee. However, ld. TPO noted that the company M/s. Indian Toners and Developers Ltd. and assessee has same NIC Code i.e. 24222 hence this company was held as comparable. The ld. CIT (A) has discussed the facts of both the companies and facts of the assessee's case and found that M/s. Atul Ltd. is a comparable case because of the decision of Tribunal in case of M/s. Sony India Pvt. Ltd. and in respect of M/s. Indian Toners & Developers Ltd., it was held that this is not a comparable case because there was vast difference in the product manufactured by assessee and manufactured by M/s. Indian Toners & Developers Ltd. The ld. CIT (A) found that this is also incorrect to say that both the companies has same NIC Code i.e.....