TaxTMI 
TaxTMI 
2018 (9) TMI 786
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....f income for the year consideration was filed by it on 17.09.2010 declaring total income at Nil. During the year under consideration, international transactions involving provision of Engineering Design Services were entered into by the assessee with its AE namely Technyx (Canada). In order to determine arm's length price of the said transactions, reference was made by the AO to TPO u/s 92CA(1) of the Act. In the transfer pricing study report filed along with the return of income, arm's length price of the said international transactions was determined by the assessee by applying or Transitional Net Margin Method (TNMM) with Operating Profit to Operating Cost (OP/OC) as the Profit Level Indicator (PLI). Total 5 entities were selected as comparables and since their average OP/OC as worked out in the TP study report at 5.61% was less than the OP/OC of 12.78% as declared by the assessee, price charged in the international transactions with its AE was claimed to be at arm's length by the assessee. 3. The TPO accepted the TNMM adopted by the assessee as the most appropriate method for determining the arm's length price of the international transactions entered into by the assessee with....
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....le time and costs. The portfolio of services includes concept design, product design and development, advances analysis, reliability engineering and value engineering. 2. ASE Structure Design Pvt. Ltd. ASE Structure Design Pvt. Ltd. was incorporated in the year 2003 to offer offshore CADD and engineering design services enabling companies to optimize their costs, increase their capacities and to win global projects through timely, accurate and quality work. The company is an execution partner to Telecom Infrastructure Design & Engineering Design house around the world. 3. Babcock Borsig Softtech (P) Ltd. BBSPL is a multi-disciplinary design and detailed engineering consultancy company based at Chennai. The company was originally a 100% subsidiary of IDEA (International Development and Engineering Associates Ltd.) and has reputed customers in India and abroad. BBSPL is also a 100% Export Oriented Unit and is registered with the Software Technology Park of India (STP). 4. Nauvata Engineering Pvt. Ltd. Nauvata Engineering Pvt. Ltd. is fully committed to being the leading provider of engineering design services. Since the average OP/OC of the above 4 entities selected ....
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....ssee and the issue should be decided after hearing the objections from the assessee in this behalf. As per the judicial precedents of our country, the information gathered by the Ld. TPO should be provided to the assessee to enable it to verify the comparable figures with a right to file objection/ apply thereon, I have further noted that the Ld. TPO made certain incorrect assertions / statements in paragraph no. 6.1 of the order under section 92CA(3) of the Act that the appellant had not made any specific objection with regard to the companies selected by the Ld. TPO as the same was not provided to the appellant and also that the appellant had not asked for the same. During the course of hearing before me, the appellant collected and submitted the annual financial statements of aforesaid companies for the relevant financial year. I have noted that the 'Function-Asset-Risk' (FAR) of Babcock Borsig Softech (P) Ltd. for the relevant financial year is completely different from the FAR of the appellant. I have further noted that the audited financial statements of Nauvata Engg. (P) Ltd. and ASE Structure and Designs (p) Ltd. for the relevant financial year do not disclose 'profit & los....
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....arately, the learned DR has submitted that the solitary issue involved in this appeal of the revenue relates to the deletion by the Ld. CIT(A) of the addition of Rs. 81,53,989/- made by the AO on account of transfer pricing adjustment and the limited grievance of the revenue is that the Ld. CIT(A) while giving relief to the assessee on this issue did not ask for the remand report from the AO/TPO which was warranted in the facts and circumstances of the case. In this regard, he has invited our attention to the finding recorded by the Ld. CIT(A) in paragraph no 7 of his impugned order to the effect that TPO did not provide an opportunity to the assessee to have the audited financial statements along with the FAR analysis of the 3 entities namely M/s. Bapcock Pvt. Ltd., M/s. Nowata Engineering Pvt. Ltd. and M/s. AAC Structure and Design Pvt. Ltd. selected a comparables by the TPO. He has contended that this finding recorded by the Ld. CIT(A) on the basis of submissions made on behalf of the assessee before him was contrary to the finding recorded by the TPO in paragraph no 6.1 of his order wherein it was clearly mentioned by him that the financial statements of all the entities select....
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....he FAR of the assessee-company. He has contended that no reason whatsoever is given by the Ld. CIT(A) in his impugned order to come to this conclusion. 8. After considering the submissions made by the learned DR as well as the written submissions filed by the learned counsel for the assessee, we find merit in the contention of the learned DR that the Ld. CIT(A) ought to have given an opportunity to the AO/TPO to offer their comments on the various aspects of the matter by seeking remand report before accepting the submissions made on behalf of the assessee. We find that the Ld. CIT(A) has passed a very cryptic order and after extracting the submissions made on behalf of the assessee on page no 3 to 58 of his impugned order, he has given his conclusions hardly on one and half pages. As rightly pointed out by the learned DR, the comparables selected by the assessee were rejected by the TPO on specific grounds, but the Ld. CIT(A) has accepted the same only by stating that the FAR of the said entities was comparable to the FAR of the assessee-company. He has not given any reason whatsoever to come to that conclusion and has also not commented upon the specific grounds given by the TPO....