TaxTMI 
TaxTMI 
2018 (6) TMI 409
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....the issuance of directions of DRP and based the draft order has: Ground challenging the validity of the order 1. erred in passing the order under section 143(3) read with section 144C(13) of the Act without giving effect to any of the directions passed by the DRP thereby passing a void order. 2. erred in not following the directions of the DRP which were based on the orders passed by the Hon'ble Tribunal in Assessee's own case for earlier years. General ground challenging the transfer pricing adjustment 3. erred in making transfer pricing adjustment of Rs. 31,93,76,539 to the total income of the Appellant by not considering / accepting the comparability analysis undertaken in the Transfer Pricing study report for benchmarking the international transactions; Selection of inappropriate set of comparables and not rejecting inappropriate company considered as comparable 4. erred in accepting certain non-comparable companies and rejecting a comparable company Treatment of exceptional rent expenses as operating expense instead of non-operating expense and non-grant of adjustment on account of business reasons for loss due to PRC cranes 5. erred in treating exceptional ren....
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....h transactions are so inter-related; (iv) The comparability criterion of specific characteristics of the products/services transferred is not met when the assessee company aggregates the distinctly separate manufacturing and services segments; (v) The assessee company itself has provided distinct and separate segments from its financials and sticking to the aggregation approach would mean that there is contamination of the profits earned from separate transactions of Manufacturing, Trading and Servicing; The functions performed, assets used and risks undertaken of the service segment is totally different as opposed to the manufacturing Segment. 2. The Hon'ble DRP has erred on facts and circumstances of the case and in law, in allowing adjustment to the Profit Level Indicator of comparables for higher costs towards import of materials when i) It was not demonstrated that there were any differences in Functions, Assets or Risks in the case of comparables and the assessee; ii) It ignored the fact that some difference in costs or expenses is likely to be there on each of the heads of expenses and accepting the plea of assessee will require both upward and downward adjustments....
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.... to different years starting from assessment year 2007-08 to 2010-11. He also pointed out that the assessee is aggrieved by inclusion of WMI Cranes Ltd. and exclusion of Brady & Morris Engineering Company Ltd. In this regard, he stated that the Tribunal adopted aggregation approach in assessment year 2007-08 onwards. Further, the Tribunal in ITA No.521/PUN/2015, relating to assessment year 2010-11, vide order dated 07.06.2017 directed the exclusion of WMI Cranes Ltd. on account of extraordinary event of demerger. The relevant findings of the Tribunal are vide paras 6 and 7 at page 5 of the Tribunal's order. He also pointed out that even during the year under consideration, there was demerger as is evident from the audit report of the said concern placed at page 439 of Paper Book and the same merits to be excluded. 10. We have heard the rival contentions and perused the record. The assessee is engaged in manufacturing of material handling equipments. The activities of the assessee were classified in three segments viz. manufacturing, trading and service. The issue in present appeal is with respect to manufacturing activity. During the period relevant to assessment year under appeal....
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.... the assessee and in case the margins shown by the assessee are within the range of +/- 5% of mean margins of comparables, then no adjustment on account of arm's length price is to be made in the hands of assessee. The grounds of appeal raised by the assessee are thus, partly allowed. 12. Now, coming to the appeal filed by the Revenue. The ground of appeal No.1 raised by the Revenue is against aggregation approach directed by the DRP. 13. The learned Authorized Representative for the assessee pointed out that similar view has been taken in assessment years 2007-08, 2008-09 and 2009-10. 14. We find that same is covered in favour of assessee by the order of Tribunal; first in assessment year 2007-08 i.e. ITA No.1683/PN/2011, order dated 31.12.2012. Similar approach was applied in the subsequent years and applying the same parity of reasoning as in para 34 of order in assessment year 2007-08, we find no merit in the ground of appeal No.1 raised by the Revenue and the same is dismissed. 15. Now, coming to the issue raised by the Revenue in ground of appeal No.2 i.e. against order of Dispute Resolution Panel (DRP) in allowing adjustment to the Profit Level Indicator of comparable....
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.... of the Act, which prescribes that income arising from an international transaction shall be computed having regard to the ALP, and the meaning of the expression "international transaction' is contained in sec. 92B of the Act to mean a transaction between two or more associated enterprises. Therefore, it is a natural corollary that the adjustment arising as a result of transfer pricing analysis is to be confined to international transactions undertaken with the AEs alone and not in relation to non-AE transactions. Similar point arose in assessee's own case for the A.Y. 2006-07 in ITA No. 120/PN/2011 (supra) wherein Tribunal after referring to sub-clauses (i) and (ii) of Rule 10B(1)(e) of the Rules and certain precedents by way of decisions of the co-ordinate Benches, finally accepted the plea of the assessee in the following words: "49. All these cited decisions in general and the decision in the case of M/s. Jt. Jin Electronics I P. Ltd. Vs. ACIT 36 SOT 227, in particular are uniform in asserting that the TP adjustments are to be computed not considering the entity level sales. Rather it should be done ideally considering the relatable sales drawing the quantitative rel....