TaxTMI 
TaxTMI 
2018 (4) TMI 499
X X X X Extracts X X X X
X X X X Extracts X X X X
....ne of Rs. 12,17,36,835/- in respect of software support services to its Associated Enterprises (AEs). The assessee adopted Transactional Net Margin Method (TNMM) as most appropriate method to benchmark its transactions. Profit Level Indicator (PLI) to determine arm's length transactions with its AEs was computed by the assessee at 16.04%, as against average arithmetic mean margin of 11.83% of the comparables selected in the TP study report. The Transfer Pricing Officer (TPO) rejected some of the companies selected by assessee in the list of comparables and introduced some new companies as comparables. The TPO finally selected 11 companies as comparables. The final list of comparables along with PLI after providing for working capital adjustment as per TPO order is as under: Sr. No. Name of the Company FY 2011-12 OP/OC % With working Capital adjustment. 1 CG-VAK Software and Export Ltd. 18.40 23.29 2 e-zest Solutions Limited. 9.30 14.34 3 Mindtree Limited (segmental) 18.20 18.20 4 Persistent Systems Ltd. 33.61 38.29 5 R.S Software (India) Ltd. 17.35 23.94 6 Thirdware Solutions Ltd. 36.98 42.32 7 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....7.77 82.87 15. Sankhya Infotech Ltd. 4.45 8.03 4.1 The ld. AR pointed that the DRP in its directions specifically observed that Tata Elxsi Ltd. (Software Development and Service segment) is not comparable to assessee's business of Software Development. The other three companies are neither emanating from draft assessment order nor from the directions of DRP. The addition of these four companies as comparables by Assessing Officer on its own is contrary to the mandate of section 144C(10) & (13) of the Act. The Assessing Officer cannot go beyond the directions of DRP. The ld. AR to support his submissions placed reliance on the decision of Hon'ble Madras High Court in the case of CIT Vs. Sanmina SCI India Pvt. Ltd. (Appeal No. 567 of 2016) decided on 08.08.2017. The ld. AR submitted that if four companies subsequently added by the Assessing Officer are excluded from the list of comparables, assessee's international transactions with its AEs would fall within the arm's length and no adjustment would survive. The ld. AR pointed that in case ground No. 1 and 2 raised in appeal by assessee are allowed, then other grounds raised in appeal would become academic. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... assesses intimates to the Assessing Officer the acceptance of the variation or (b) no objections are received within the period specified in sub section (2) (4) The Assessing Officer shall, not withstanding anything contained in section 153 [ or 153B], pass the assessment order under sub section (3) within one month from the end of the month in which,- (a) the acceptance is received; or (b) the period of filing of objections under sub section (2) expires. (5) The Dispute Resolution Panel shall, in a case where any objection is received under sub section (2), issue such directions, as it thinks fit, for the guidance of the Assessing Officer to enable him to complete the assessment. ......................................... ......................................... (10) Every direction issued by the Dispute Resolution Panel shall be binding on the Assessing Officer. (11) No direction under sub-section (5) shall be issued unless an opportunity of being heard is given to the assessee and the Assessing Officer on such directions which are prejudicial to the interest of the assessee or the interest....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as proposed under section 144C(1) stand expanded. The interests of both the Assessee and the Revenue to respond to the proposed variations has been protected and an opportunity to be heard has been specifically provided for under sub section (11). Thus where Legislature provided for any variation in assessment over and above that proposed in the order of draft assessment, it has specifically provided for an opportunity of hearing prior thereto. Thereafter, in terms of sub section (13), the Assessing Officer is found to conform to the directions given by the DRP and give effect to the same. Contrary to the mandate in sub section (11), it has been thought unnecessary to grant an opportunity to the assessee prior of to the passing of the final orders. This leads to the inescapable conclusion that the Assessing Officer is not expected to, and shall not venture to raise any issue except the variations specified by him in 144C(1) in the order of draft assessment or any issue raised by the DRP by way of enhancement in terms of sub section (8) of 144C. The scheme of S. 144C would thus be wholly violated if the Assessing Officer takes it upon himself to include in the final order of assess....