TaxTMI 
TaxTMI 
2018 (1) TMI 1158
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....nder Section 260A of the Income Tax Act, 1961 ('the Act') against an order dated 23rd November, 2016 passed by the Income Tax Appellate Tribunal ('ITAT') in ITA No.5713/Del/2012 for the Assessment Year ('AY') 2008-09. 3. Notice. Mr. Rahul Chaudhary, the learned Senior Standing Counsel accepts notice for the Respondents. 4. Admit. The following question of law is framed for consideration: Whether on the facts and in the circumstances of the case, the ITAT erred in law in directing the Transfer Pricing Officer (TPO) to undertake a fresh Transfer Pricing (TP) study for benchmarking of the international transactions involving the Assessee and its Associated Enterprises (AE)? 5. The Appellant Assessee is a Branch Office of the ....
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....l fibre cable, automotive substrates etc. The Assessee states that it provides services such as collecting market information on potential buyers, visiting distributors, direct customers and strategic partners, liaising and meeting with existing and potential customers/distributors, follow up until delivery in respect of the orders which are directly placed by distributors and other customers to its AEs, etc. In lieu of these services, the Assessee is reimbursed all the costs incurred by it along with a mark up of 5%. 6. It is further stated that during the financial year relevant to AY 2008-09, the Assessee entered into following international transactions with its AE: S. No. International Transactions Amount (Rs.) ....
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.... Asian Business Exhibition and Conferences Ltd. 15.85 7. Overseas Manpower Corpn. Ltd. 3.23 8. Times Innovative Media Ltd. (-)2.21 Average 7.48 Operating Margin of Appellant 5.73 9. The Assessee on the basis of the aforementioned TP analysis considered the international transaction of market support services to be at arm's length under Chapter X of the Act. 10. The return filed by the Assessee for the AY in question was picked up for scrutiny and a reference was made by the Assessing Officer ('AO') to the TPO under Section 92CA(1) of the Act. By an order dated 7th October, 2011, the TPO rejected the Assessee's TP study and recommended an upwa....
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....llocation of common expenses to the Agency segment on the basis of sales/revenue under the said segment vis-a-vis the Distribution segment and not in the ratio of their gross margins. 13. The DRP in the order dated 30th July, 2012 directed exclusion of 2 of the comparables, that is, Rites Ltd. and Vapi Waste & Effluent Management Co. Ltd. The revised average OP margin of the remaining comparables was worked out at 23.21% by the TPO. The TP adjustment stood increased to Rs. 1,40,30,533/-. On the basis of the above order of the DRP and the consequential order of the TPO, the AO passed the final assessment order dated 10th September, 2012 making the aforementioned increased TP adjustment. 14. Aggrieved by the aforementioned final assessm....
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....sessee thereafter filed a Miscellaneous Application dated 28th March, 2017 before the ITAT under Section 254 (2) of the Act. The said application is stated to be still pending before the ITAT. 17. Mr. Ajay Vohra, the learned Senior Counsel appearing for the Assessee submitted that the ITAT ought not to have remanded the matter to the TPO for undertaking the TP analysis afresh. He pointed out that merely because the computation of operation margin of the Assessee as tested party was to be reworked by the TPO in terms of the ITAT's finding as regards the allocation of expenses, it did not preclude the ITAT from examining whether the selection of comparables was correct. He submitted that for the purposes of the benchmarking analysis, compa....
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....n the basis of gross margin in the agency segment and not in the ratio of sales for the purpose of computing ALP of the international transactions, had nothing to do with the above issue concerning selection of comparables. For the latter purpose, Rule 10B (2) read with Rule 10B (3) of the Income Tax Rules require the said exercise to be undertaken with reference to inter alia "the functions performed/taken into account, assets ought to be employed and the risks assumed" by the tested party and the comparable. A specific characteristic of the property transferred or services provided in both the controlled and uncontrolled transactions had to be taken into consideration. 21. It is not understood why the ITAT did not undertake such exerci....