TaxTMI 
TaxTMI 
2016 (11) TMI 1403
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....t the assessing officer erred on facts and in law in making addition of Rs. 1,40,30,553 of the alleged difference in the arm's length price of the international transactions undertaken by the appellant. 2.1 That the assessing officer/TPO erred on facts and in law in inappropriately aggregating the international transaction of provision of agency services with market support services, without appreciating that such services ought to have been aggregated with the distribution segment, being closely linked with such segment. 2.2 The TPO erred on facts and in law in inappropriately allocating expenses to the agency segment in the ratio of sales, not appreciating that such allocation ought to have been done on the basis functions performed, assets employed and risks assumed by the appellant in the agency segment. 2.3 That the assessing officer I TPO erred on facts and in law in using inappropriate quantitative filters which are not based on any rational or reasonable basis. 2.4 That the assessing officer I TPO erred on facts and in law in rejecting the comparable companies selected by the appellant, without appreciating that such companies are comparable to the appellant....
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....cting marketing information, exploring sales and distribution services, marketing research and promoting awareness about the Corning products in India market and is remunerated for such services at cost plus mark up at 5%; that assessee claimed that its agency service activities and distribution activities are similar in nature, thus clubbed together and determined the Arms Length Price (ALP) by applying TNMM. However, TPO disagreed with the assessee company and segregated agency activities from distribution and clubbed it with marketing activities for computation of ALP. 4. Assessee company being a service provided applied TNMM with OP/OC as the Profit Level Indicator (PLI) and worked out tested party margin at 5.73%. 5. Assessee company chosen 12 comparables showing margins of the comparables at 8.86% by using data for 2006, 2007 and 2008 and found its international transaction at arms level, so far as marketing support services are concerned. 6. TPO, in order to benchmark the international transaction, combined all agency services activities with market support activities and applied TNMM and determined the income from the agency services by allocating indirect expenses....
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....resent appeal have already been set at rest by the Tribunal in ITA No.2564/Del/2011 vide order dated 28.08.2015 in assessee's own case qua AY 200304; that there is no change in the facts and circumstances during the year under assessment; that the ground no.1 is general in nature, ground no.2.1 has already been decided against the assessee in assessee's own case being ITA No.2564/Del/2011 for AY 200304 (supra) and the said order has since attained finality; that ground no.2.2 needs to be argued and grounds no.2.3 to 2.7 need to be determined in the light of the findings to be returned in ground no.2.2, which is also covered by aforesaid order dated 28.08.2015 for AY 2003-04. This factual position has not been controverted by the ld. DR for the revenue. GROUND NO.2.2 12. Undisputedly, assessee company entered into international transactions duly described in preceding para 3. The Assessee company is into the distribution business involving import of Rough Ophthalmic Blanks (ROB) from AE; providing agency services in respect of ophthalmic glass products sold by Corning France directly to buyers in India at the commission of 3% of the sales value as per Agreement dated 01.01.201....
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.... advertisement and insurance have no nexus with the agency function. 28. We find merit in the said conclusion as no material has been lead to discredit the above conclusion. Thus we hold that aggregate indirect expenses common to both the functions are of Rs. 1,58,72,993/- (Rs. 1,93,29,321/- - Rs. 30,78,570/- - Rs. 3,77,758/-). The CIT(A) further more held that allocation of such expenses should be done on the basis of gross margin of distribution function and commission income receipts and not on the basis of sales, as adopted by the TPO. Here too, we do not find any infirmity in the approach adopted by the CIT(A). The CIT(A) has correctly held that allocation of expenses in proportion to sales would amount to give equal weightage in terms of functions performed, assets utilized and risks assumed to both distribution function as well as agency service activity, which otherwise involves much lesser functions and utilization of assets and risk. The CIT(A) has held as under: "It would not be correct to allocate expenses attributed to purchase/sale of finished goods, warehousing and handling of inventory etc., to the agency service activity, wherein such activities are not in....