2016 (5) TMI 796

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....he following questions of law for our consideration:"( i) Whether on facts and circumstances of the case, the Tribunal was correct in law in upholding the CIT(Appeals) order deleting the addition of Rs. 10,38,33,814/being transfer pricing adjustment by applying cash profit to operating cost as Profit Level Indicator under Transactional Net Margin Method for determining Arm's Length Price, without appreciating that no such claim was made before the TPO/AO before whom the ratio of operating profit to the total cost was applied by the assessee itself as provided under Rule 10B(1)(d) of the Income Tax Rules?" (ii) Whether the Tribunal was correct in law in applying the principle of res judicata referring to the findings of the Transfe....

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....ansfer Pricing(TP) adjustment to the Commissioner of Income Tax (Appeals) [CIT(A)]. At the hearing the respondent submitted that as the method of charging depreciation on fixed assets differed between the comparables finally selected and the respondentassessee it resulted in distorting the resulting comparison. Thus the respondentassessee while continuing to apply the TNMM method sought to apply the ratio of cash profit to operating cost as the PLI . The CIT (A) called for the remand report from the TPO. The TPO in his remand report agreed that the respondents working for determining the PLI on the basis of cash profit to operating cost is appropriate in the present facts for comparison with the six comparables. Thus the CIT (A) on the basi....

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....t on record before the CIT (A). It was only on the basis of documents which were already on record and were subject matter of examination by the TPO. Thus the TPO in his remand report found that in the facts of this case the ratio of cash profit to operating cost to determine the ALP was correctly raised by the respondentassessee. Therefore question no.(i) as framed does not give rise to any substantial question of law. Thus not entertained. 4. Regarding Question No.(ii): (a) Mr. Suresh Kumar, learned counsel for the Revenue urges the fact that the ratio of cash profit to operating cost were applied by the TPO for the subsequent years i.e. A.Y.200708 and 200809 cannot be the basis to adopt it for the subject assessment year. This on t....