TaxTMI 
TaxTMI 
2017 (12) TMI 809
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....O') and the Honourable Dispute Resolution Panel ('Hon'ble DRP') grossly erred in determining an adjustment of INR 2,82,48,956/- with respect to the international transaction rendered by the taxpayer U/S 92CA of the Income-tax Act, 1961. 2. The learned AO/TPO/DRP while proposing the adjustment has erred in: * Ignoring the business model followed by the Assessee for the services rendered to Associated Enterprise ("AE") vis-a-vis Non-AEs; * Disregarding the segmental results of the Assessee and thereby proceeding to consider the margin of the Assessee at the entity level for the transfer pricing analysis. 3. Without prejudice to the other contentions of the Appellant, the Ld. AO/Ld. TPO has failed to appreciate that the international transactions are arm's length even based on the fresh comparability analysis as per the directions of Hon'ble Dispute Resolution Panel ("DRP"), if segmental result pertaining to AE transactions is considered. 4. The learned AO / learned TPO / Hon'ble DRP erred in rejecting the TP documentation maintained by the Appellant by invoking provisions of sub-section (3) of 92C of the Act. 5. The learned AOI le....
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.... have been accepted as comparable: * CAT Technologies Ltd. * Helios & Matheson Information Technology Ltd. 16. The learned AOI learned TPOI Hon'ble DRP erred in not allowing appropriate adjustment towards the risk difference between the Appellant vis-a-vis the comparable companies." 2. Briefly stated the facts necessary for adjudication of the controversy at hand are : CSR Technology India (Private) Limi8ted, the taxpayer, earlier known as SIRF Technology India Private Limited is a subsidiary of CSR Inc., a group company of CSR, engaged in the provision of software development services to CSR Inc. Under a research & development agreement with CSR Inc., CSR Technology undertakes software development services exclusively for CSR Inc. During the year under assessment, the taxpayer entered into international transactions with its Associated Enterprises (AE) as under :- S.No. Type of international transaction Method Selected Total value of transaction (Rs.) MAM PLI i. Provision for software development services Transactional Net Margin Method (TNMM) Operating profit/ Operating Cost (OP/OC) 98,789,879 ii. Pa....
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.... the ground that transaction with non-AE is minuscule. TPO has not raised any query as to segmental result nor has considered the reply filed by the taxpayer giving complete detail, which were also before the ld. DRP. Ld. AR relied upon the decisions rendered by the coordinate Bench of the Tribunal in LG Electronics India Private Ltd. vs. ACIT in ITA No.5140/Del/2011 and Honeywell Electrical Devices & Systems India Ltd. vs. ACIT - (2014) 29 ITR (T) 347 (Chennai - Trib.) 8. However, the ld. DR for the Revenue in order to repel the contention raised by the taxpayer supported the decision of AO/TPO/DRP in disregarding the segmental result of the taxpayer contended inter alia that when the taxpayer is providing similar services to the AE as well as non-AE, there cannot be any nonallocation key and the taxpayer has made artificial bifurcation only to raise the profit; that when the taxpayer is doing same business with AE and non-AE, only logical conclusion is that same employees are doing work for providing services to AE and non- AE; that no audited account with detail has been given; that decision rendered by the coordinate Bench of the Tribunal in LG Electronics India Private Ltd.....
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.... Chapter-X also becomes apparent from the language of section 92(3) as discussed infra. Thus, it is clear that the sanction is for applying the TNMM only on a transactional level and not on entity level. Of course, the TNMM can be correctly applied on entity level if all the international transactions are of sale by the assessee to its foreign AE and there is no other transaction of sale to any outsider and also there is no other international transaction. But if there are several unrelated international transactions, as is the case before us and the assessee or the TPO has applied the TNMM in a wrong manner on entity level for testing any of such transactions, then the remedy lies in correcting such mistake rather than drawing legally unsustainable conclusions by taking such mistake as a correct legal position." 11. However, coordinate Bench of the Tribunal in as M/s. LG. Electronics India Private Limited (supra) case held that the sanction is for applying the TNMM only at transactional level and not on entity level. It is further held that TNMM can be correctly applied on entity level if the international transactions are on sale by the taxpayer to its foreign AE and there is ....