2018 (8) TMI 726

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....ortion of the learned Tribunal remanding the case back to the TPO/AO is quoted below for ready reference:- " The total revenue if both segments are considered together would come to Rs. 4.843.97 Crores and operating profit 202.15 Crores. Profit on sales which is the PLI adopted, would be 4.878%. Learned TPO, himself at Annexure-A of his order has given a finding that arithmetic mean of the PLI of the comparables considered by him for manufacturing segment after adjustment was 7.73% At Annexure-F, he has given a finding that PLI of the trading segment of the comparables was 6.42%. Learned TPO has also given a finding that both these were within the +/- 5% range allowable under the Act. It is also not disputed that while computing the manufacturing segment results the TPO himself had accepted royalty as a part of cost. This is clear from the segmental result given by the TPO at para-3 of his order which is not reproduced here for brevity. Going by the methodology adopted by the learned TPO, the combined results as mentioned by us above, gave the assessee a PLI of 4.878% for international transactions. In such a scenario, considering the argument of learned DR, that ALP of the royal....

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....ndertaken by the assessee were so interlinked and interconnected, requiring it to be evaluated together. We find that there was no change in the business model of the assessee for the impugned assessment year. Hence, the order of the Tribunal for assessment year 2007-08 would be very relevant portion. Paras.41 to 47 of the order of the Tribunal is re-produced here under; " 2. We have given a very careful consideration to the rival submissions. On the issue as to whether the international transactions have to be considered separately or independently without aggregating them as part of the segment to which they relate, we find that the term 'international transaction' has been defined in section 92B of the Act to mean and include transactions between two or more AEs, either or both of whom are nonresidents, in the nature of purchase, sale or lease of tangible or intangible property, or provision of services, or lending or borrowing money or any other transaction having bearing on the profits, income, losses or assets of such enterprise. Section 92 of the Act provides that income from international transactions between AEs shall be computed having regard to ALP. Section 92-C of the....

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.... the case of Star India Ltd. (supra) and UKB(I) (P) Ltd. (supra). We agree with the submissions of the learned counsel for the assessee that these decisions have in fact accepted in principle that aggregation of transactions have to be done where they are interlinked but have on facts found that transactions were not interlinked and therefore held that ALP of transactions have to be determined individually. The following decisions relied upon the learned counsel for the assessee also supports the plea of the learned counsel for the assessee. : i. M/s. Thyssen Krupp Industries vs. ACIT (ITA No.7032/Mum/2011), ii. Hindustan Unilever Ltd. vs. ACIT (ITA No.7868/Mum/2010), and iii. DCIT vs. CMA CGM Global India (P) Ltd. (ITA No.5979/Mum/2010) 44. The DRP without examining the submissions on behalf of the assessee has simply endorsed the findings of the TPO. With regard to the conclusions of the DRP, upholding the order of the TPO that the trading and manufacturing segment of the assessee are distinct and not inter-related warranting combined transaction approach, the ld. counsel for the assessee drew our attention to the order of the Tribunal in assessee's own case for A.Y. 2003....

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....Tribunal, we hold that the trading and manufacturing segment of the assessee are not distinct and are inter-related warranting combined transaction approach. 46. We have already seen in para 9 of this order that the TPO has arrived at the bifurcation of the manufacturing and trading segmental operating results. In view of our conclusions that the trading and manufacturing segments are interlinked and therefore a combined transaction approach has to be adopted, we combine the results so arrived at by the TPO, which is given in para 9 of this order. If the segmental results are combined, the operating revenue of the assessee would be 3767.91 crores and the operating profit would be Rs. 94.34 crores. Thus, the operating profit margin on sales would be 2.517. 47. Even assuming that the adjustment on account of operational efficiency made by the TPO is to be accepted, then the combined margin after adjustment of the five comparables which is given in para-20 of this order, would be 7.10%. If the arithmetic mean of the five comparables as above is tested as against the operating profit margin on sales of the assessee at 2.517%, then the same would be within the (+)/(-) 5% range of th....