TaxTMI 
TaxTMI 
2015 (3) TMI 9
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...., financial settlement and back-end support services to mobile operators. The return of income for the year under consideration was filed by it on 11.10.2010 declaring total income of Rs. 6,21,34,880. During the course of assessment proceedings, it was noticed by the Assessing Officer that the assessee company has entered into the following international transactions with its Associated Enterprises (AEs) for providing contract software development and IT enabled back office services to its AE. A.E. Nature of transaction Amount(Rs.) MACH s.a.r.l. Provision of software Development Services 2,04,99,753 End 2 End VAS ApS Provision of software Development Services 71,54,167 MACH Connectivity ApS. Provision of software Development Services 41,06,236 Cibernet Corporation Provision of software Development Services 3,12,78,371 Progrator/gatetrade (Division of MACH Aps) Provision of software Development Services 2,61,79,069 Cibernet Plc Provision of ITES 2,32,16,719 MACH s.a.r.l. Payment for operational and marketing services 1,00,96,631 MACH s.a.r.l. Payment for product management support services 35,83,734 ....
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.... the comparables suffered from defects and the same, therefore, had resulted in selection of inappropriate comparables and rejection of appropriate comparables. He also found that the TP analysis done by the assessee was based on segmental results, which were not audited. According to him, unaudited information could not be taken as the basis to compute the profitability of the segments for Transfer Pricing Analysis, as the same was unreliable. He observed that the allocation of expenses, even otherwise, involved a lot of assumptions and presumptions and it was, therefore, not possible to arrive at segmental financials, without giving room for any ambiguity. He held that it was therefore, better to go with the enterprise level margins for the purpose of ALP determination under TNMM. He accordingly rejected the TP study report furnished by the assessee and proceeded to carry out his own TP analysis for the purpose of determining the ALP of the relevant international transactions by applying TNMM at enterprise level margin. In this regard, he considered the various objections raised by the assessee to the new search conducted by him for selecting the appropriate comparables and after....
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....e raised by the assessee before the Dispute Resolution Panel which inter alia included the objections of the assessee in respect of rejecting its TP study report, based on segmental financials, by the TPO holding that the same were not reliable. These objections raised by the assessee were found to be not sustainable by the DRP, barring one objection raised by the assessee for the inclusion of Infosys Technologies Ltd. as comparable by the TPO. The DRP accordingly directed the AO/TPO to recompute the ALP of the international transactions of the assessee with its Associated Enterprises by excluding Infosys Technologies Ltd. from the list of final comparables. As per the directions of the DRP, the Assessing Officer/TPO recomputed the Arm's Length Price of the international transactions of the assessee with its AEs at Rs. 13,35,83,419 and accordingly an addition of Rs. 1,00,97,458 was made by the Assessing Officer to the total income of the assessee on account of TP adjustment in respect of relevant international transactions of the assessee involving the provision of IT/ITE Services to its Associated Enterprises, in the assessment completed under S.143(3) read with S.144C(5) of the A....
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....f the view that it is incumbent upon TPO to examine the segmental details after verifying the allocation of direct and indirect expense made by the assessee with reference to the respective allocation keys and if on such examination/verification, it is found that the segmental financials are not reliable, he could reject the same by giving specific reasons. Otherwise, if the allocation of overhead is by and large fair and reasonable and the segmental results can be fairly and appropriately adjusted, by changing/adjusting the allocation, the TPO, in our opinion, should make such adjustments and do the Transfer Pricing Analysis on the basis of such adjusted segmental financials, instead of rejecting the same straight away. We, therefore, remit this issue to the file of the AO/TPO to decide the same afresh after examining/verifying the segmental financials of the assessee and after giving reasonable opportunity of hearing to the assessee. Grounds No.1 to 10 are accordingly treated as allowed for statistical purposes. 11. The next issue involved in grounds No.11 and 12 relates to the addition of Rs. 1,60,66,825 made to the total income of the assessee by way of TP adjustment on acco....