TaxTMI 
TaxTMI 
2018 (1) TMI 1411
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.... in the Law, the DRP has grossly erred in confirming the addition of Rs. 4,195,482 to Arm's Length Price (ALP) of representation services segment without establishing 'on merits' any sort of discrepancy in the details / evidences submitted before the DRP and the Transfer Pricing Officer (TPO) in the remand proceedings to rebut the computation of ALP pursuant to directions of Hon'ble Delhi High Court in WP (C) No. 14079/2009 dated 22.12.09. 3. That the DRP has grossly erred in confirming the addition of Rs. 4,195,482 to Arm's Length Price (ALP) of representation services segment without fairly and judiciously dealing with various contentions and objections placed before the DRP to rebut the computation of ALP of representation services segment." 2. Briefly stated the facts necessary for adjudication of the controversy at hand are : the taxpayer is into the business of organizing and performing trade fairs, exhibition, seminars, congresses and similar events and also engaged in advising and developing trade fairs, seminars and similar projects. The taxpayer is also into the business of arranging for orders in the field of international trade fairs and ....
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....6. We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case. 7. Undisputedly, the TPO in order to determine the ALP of the international transaction taken the profitability of the taxpayer at entity level and then computed the average OP/TC of 3 comparables as under :- "The profitability of the assessee at entity level is as under :- Cidex Trade Fairs Private Limited F.Y. 2005-06 INCOME Revenue 29,228,272 Total Op. Income 29,228,272 EXPENDITURE Payment towards services for trade fairs and exhibitions 12,274,858 Payments and provisions for employees 9,524,123 Administrative Selling & other expenses 13,192,218 Depreciation 1,634,892 Total Op. Expenses (TC) 36,626,091 Operating Profit (OP) (7,397,819) OP/TC (%) (20.19%) The average OP/TC of the three comparables are tabulated as under :- S.No. Name of the Company OP/TC (%) 1 IBI Chematur (Engg. & Consultancy) Ltd. 19.01% 2 ICRA Online Li....
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.... case. 11. However, on the other hand, the ld. DR for the Revenue while relying upon the order passed by the ld. TPO/DRP contended that the TPO has rightly computed the cost base representation activities separately and has added collection of sale of entry tickets on revenue side as well as on cost side as the collection of sale of entry tickets has been aggregated with the representation activities; that the TPO has rightly rejected the CPM under the identical situation in case of the taxpayer in AY 2005-06 and has adopted TNMM which has been confirmed by ITAT in ITA No.2139/Del/2012 date 19.03.2014 against which no appeal has been filed by the taxpayer; that the TPO has taken the proportionate cost culled out of the total cost and that the TPO after rejecting the CPM has rightly adopted TNMM which is an accepted method as per order of AY 2005-06; that the segmental account has been rightly rejected and this issue has been confirmed by the Tribunal. 12. So far as question of excluding the domestic transaction for determining the ALP of international transaction is concerned, it is settled principle of law that TP adjustment can be made qua international transactions only. T....
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....order, TPO has categorically mentioned that, "I have not been able to find any segmental accounts with identifiable costs in the Profit and Loss account of the assessee. Hence the basis of such segmentation in respect of the cost base for representation services is not determinable". So, in the given circumstances, we are of the considered view that the taxpayer is directed to again place on record segmental accounts with identifiable cost in profit and loss account of the taxpayer to be examined by the ld. TPO. 16. In so far as question of denying the benefit of +/- 5% by applying the TNMM under Second Proviso to section 92C (2) by ld. TPO/DRP is concerned, the ld. AR for the taxpayer relied upon the decision rendered by the Tribunal in case cited as (i) Sony India (P) Ltd. vs. DCIT - 315 ITR (AT) 150; (ii) ACIT vs. MSS India (P) Ltd.- 123 TTJ 657, (iii) M/s. Adobe Systems India Pvt. Ltd. vs. ACIT in ITA No.5043/Del/2010 dated 21.01.2011 and M/s. Symantec Software Consultants vs. ACIT in ITA No.7894/2010 dated 31.05.2011. 17. However, on the other hand, ld. DR for the Revenue relied upon the decision rendered by Special Bench of the Tribunal in IHG IT Services (India) (P.) L....