TaxTMI 
TaxTMI 
2017 (11) TMI 1471
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....n'ble Dispute Resolution Panel CORP') are bad in law. 3. On the facts and circumstances of the case and in law, the Ld. AO / Hon'ble DRP erred in confirming the transfer pricing adjustment amounting to INR 17,60,73,335 of the appellant. 4. On the facts and circumstances of the case and in law, the Ld. AO/Hon'ble DRP/Ld. TPO erred in law and in facts by not taking cognizance of the fact that the same international transactions of appellant has been accepted by revenue authorities to be at arm's length in previous years. 5. On the facts and circumstances of the case and in law, the Ld. AO / Hon'ble DRP/Ld. TPO erred in law and in facts by not taking cognizance of the India Korea tax treaty. The Ld. AO / Hon'ble DRP / Ld. TPO should follow consistency in approach. 6. On the facts and in circumstances of the case and in law, the Ld. AO / Hon'ble DRP / Ld. TPO erred in misunderstanding appellant's business model and functional and risk profile. 7. On the facts and in circumstances of the case and in law, the Ld. AO/Hon'ble DRP/Ld. TPO erred by not accepting the economic analysis undertaken by the appellant in accordance with the pro....
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....s a South Korean part of the Hyundai Motor Group providing total rail business solutions throughout the world ranging from manufacturing of rolling stock to the supply of turnkey rail systems. The taxpayer is also into advanced defence industry products and supply of industrial plants and environment-friendly facilities. The taxpayer has reputation of an integrated heavy industry company. Major international transaction of the taxpayer is qua provision of administrative support services. During the year under assessment, the taxpayer entered into international transactions as under :- Sl. No. Nature of transaction Value (Rs.) 1 Rendering of administrative support services 63829826 2 Reimbursement of expenses to AE 2354284 3 Reimbursement of expenses by AE 388153141 3. The taxpayer in order to benchmark its international transaction used Transactional Net Margin Method (TNMM) as Most Appropriate Method (MAM) and Operating Profit / Operating Cost (OP/OC) has been chosen as Profit Level Indicator (PLI). The taxpayer chosen 11 comparables in its transfer pricing report, but subsequently on ground of updated financial data available for FY 2010-11, 5 comparable....
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....t of arbitral award. 9. Undisputedly, the taxpayer paid an amount of Rs. 95,50,32,150/- to DMRC out of remittance received from the Head Office and the balance amount of Rs. 15,43,13,697/- has been adjusted by DMRC against offshore payment in compliance to the arbitration award dated 22.07.2010. TPO taken the view that the AE has made reimbursement to the taxpayer as a support that Head Office would provide to its Project Office, but the payment arose in the course of business which the taxpayer carried out in India and as such, this transaction should form part of the margin calculation and would be added to the revenue and cost. Consequently, the TPO proposed to calculate the net margin as under :- Operating revenue Rs.1,245,638,819 Operating expense Rs.1,221,612,094 Operating income Rs.24,026,725 OP/OC 1.96% 10. In the backdrop of the aforesaid undisputed facts and circumstances of this case, the sole question arises for determination in this case is :- "as to whether the transaction of making payment of Rs.95,50,31,150/- (on account of arbitral award) by the taxpayer to the DMRC made on behalf of its AE and consequently reimbursed forms part of the margin calcul....
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.... 276,166 ROTEM ROTEM RS 3 PO Custom Duty paid on behalf of Head Office 35,049,817 ROTEM BMRCL PO Taxes and duties paid on behalf of the AE 388,153,141 Total 436,205,743 As the Citations mentioned against these expenses show that they relate to payment of service tax, custom duty, and other taxes and duties, therefore, the treatment to be meted out to these expense would be the same as to the arbitration award. If the assessee has already included these expenses in the cost base for purpose of margin calculation, it would clarify the treatment in regard to the payment on account of arbitration award, since, the nature of expenses in respect of the arbitration award and above reimbursements are the same. If not then following a consistent policy their treatment should be the same as in respect of Arbitration Award i.e. these should also form part of the cost base or otherwise depending on findings by the TPO as discussed above. The TPO is directed to follow consistent policy in respect of treatment of these reimbursement and the reimbursement of the arbitration award. The issue raised by the assessee in the application for rectificatio....
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....is to examine the issue on factual basis by following the rule of consistency in the light of its order passed in AY 2012-13. So, grounds no.3 & 12 are determined in favour of the taxpayer for statistical purposes. GROUND NO.14 17. The taxpayer claimed risk adjustment on the ground that companies operating in an uncontrolled environment will earn a risk premium whereas the taxpayer does not face some risks which are faced by the comparables, the taxpayer being a captive unit. However, the ld. TPO rejected the taxpayer's claim for risk adjustment. 18. Ld. DRP for the Revenue contended that the risk has to be explained in case of each comparable and economic analysis cannot be the basis for risk adjustment in the absence of complete data provided by the taxpayer. However, the ld. AR for the taxpayer contended that the risk adjustment is required to be given on each comparable as has been held by the coordinate Bench 'A', Pune Bench of the Tribunal in case of Honeywell Turbo Technologies (India) Pvt. Ltd. vs. DCIT in ITA No.2584/PUN/2012 order dated 10.02.2017 by following the case of Sony India Pvt. Ltd. cited as 114 ITD 448 by making following observation :- "33. Further, the ....