TaxTMI 
TaxTMI 
2016 (2) TMI 261
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....cing Officer ('TPO') for determination of all the transactions reported in Form3CEB. The assessee is engaged in providing automobile design engineering services to its sole customer Tata Motors Ltd. TML and TMETC-UK had entered into a design and engineering service agreement, for rendering services on a continuous basis to Tata Motors Ltd. and in this regard several employees of TMETC are sent to India. 2.2 In its TP study, the assessee worked out its operating profit (OP/TC%) at 6.65%. The assessee undertook a search in the Amadeus database in the European region to identify comparable and chose 5 comparable companies in the European region engaged in the rendering of design and engineering services to the automobile industry. S.No. Name of the company Average 1. Transport Research Foundation 3.35% 2. Mira Limited 0.87% 3. Dytecna Limited 5.42% 4. Ray Mallock Limited 4.21% 5. Ricardo PLC 8.77% Arithmetic Mean 4.53% Working out the three years weighted average of the comparables at 4.53%, the assessee was of the view that since its margin at 6.5% was greater, its international transactions were at....
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.... double disallowance on account of suo-moto disallowance of head office expenditure. 2.5 In pursuance of the directions of the DRP issued under section 144C(5) of the Act dated 14/11/2014, the Assessing Officer passed the final order of assessment under section 144C(13) r.w.s. 143(3) of the Act vide order dated 30/12/2014 determining the income of the assessee at Rs. 3,69,92,090/- under normal provisions of the Act. In doing so, the Assessing Officer/Transfer Pricing Officer verified and then accepted the working of the operating profit margin of the assessee and thereby neither proposed nor made any adjustment to the Arm's Length Price of the international transactions of the assessee, treating the same to be at arms length. 3.0 The assessee, being aggrieved with the final order of assessment for assessment year 2010-11 dated 30/12/2014 has preferred this appeal raising the following grounds:- "1.A) The learned Assessing Officer/Transfer pricing Officer (hereinafter referred to as 'AO') has erred in law and on facts in selecting Indian companies as comparable instead of foreign companies as comparable for benchmarking international transactions of provis....
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....nstead of foreign companies as comparables for benchmarking international transactions for provisioning of services. It is contended that the authorities below ought to have accepted the selection of foreign companies as comparables for benchmarking of international transactions considering the facts of the case on hand. 4.2.1 The Ld. Representative for the assessee submitted that while the DRP's order on the assessee's alternate ground of correction of its operating profit margins has resulted in relief to the assessee, however on the issue of use of foreign comparables for benchmarking its international transactions, the DRP has held against the assessee and upheld the orders of the authorities below in using Indian companies for benchmarking its international transactions. The Ld. Representative for the assessee submitted that the issue of the use of foreign comparables for benchmarking analysis has been decided in favour of the assessee by the order of the Co-ordinate Bench of this Tribunal in the assessee's own case for assessment years 2008-09 and 2009-10 in ITA No.7630/Mum/2012 and 1698/Mum/2014 dated 22/12/2014, wherein the Bench has accepted the contention of the assess....
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....utable to the PE are based on cost incurred in UK, then it can be very well said that PE is influenced by the economic and financial conditions of UK, as against the Indian economic factors. The Indian economic factors are not at all influencing the cost or margin of the assessee, hence it cannot be held that Indian comparables can be used to bench mark the TMETC transaction and the price with Tata Motors. For this reason, the finding of the TPO as well as DRP that PE is an Indian enterprise, working in India and therefore, its margin is to be bench marked with Indian comparables is not accepted. The PE in India is a service PE, having no establishment in India, nor incurring any costs, deployed any assets, therefore, cannot be held that it is an independent Indian enterprise. Nothing has been brought on record that assessee's PLI is influenced by the economic factors in India, viz, attribution of costs, assets or other factors relevant for determination of profits are based in India. Thus, in our opinion, the Transfer Pricing Officer and DRP were not correct in holding that UK comparables cannot be taken into consideration for the purposes of comparative analysis and bench mar....