AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2014 (2) TMI 1347
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....d. For the assessment year 2005-06, assessee filed its return of income declaring a net loss of Rs. 2,62,26,226/- which was subject to a scrutiny assessment. As assessee had entered into certain international transaction with its Associated Enterprises (AEs), the Assessing Officer referred to the matter to the Transfer Pricing Officer (TPO) u/s 92CA(1) of the Act for determination of arm's length price of such international transactions. The TPO after allowing opportunity to the assessee and considering the submissions put-forth has made an upward adjustment of Rs. 2,73,98,848/- to the stated values of the international transactions in order to determine its arm's length price. The Assessing Officer considered such adjustment and added the same to the returned income thereby determining the total income of Rs. 11,72,672/- for the year under consideration and after setting-off the brought forward losses the total taxable income was determined at 'NIL' in the assessment finalized u/s 143(3) of the Act dated 23.12.2008. The assessee carried the aforesaid adjustment in appeal before the CIT(A). Before the CIT(A), assessee assailed the action of the Assessing Officer/TPO on facts and al....
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....of TNMM analysis though the same was submitted by the Appellant 7. Excluding extraordinary expenses for the purpose of arriving at the net operating margins of the Appellant for TNMM analysis Erred on the facts and in circumstances of the case by not accepting the net operating margins of the Appellant for FY 2004-05 computed after excluding extraordinary/ non recurring expenses for the purpose of making a comparison with the comparable companies' net operating margins. 8. Losses not on account of the transfer price Erred on the facts and in circumstances of the case in concluding that losses of the Appellant are on account of transfer price and not any other reason like under utilization of capacity. 9. Adjustment to the margins of comparable companies to factor differences on account of working capital structure Erred on the facts and in circumstances of the case in not considering any adjustment to factor differences in levels of working capital employed by the Appellant vis-a-vis the comparable companies. 10. Adjustment to the margi4n s of comparable companies to factor differences on account of risk profiles Erred on the facts and in circumstances of th....
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.... circumstances of the case, the Learned Commissioner of Income-tax (Appeals) grossly erred in admitting the fresh working given by the assessee to him which are new documents/fact without confronting those to the Assessing Officer/TPO which is in violation of Rule 46A of the Income -tax Rule, 1962. 03. For this and such other reasons as may be urged at the time of hearing, the order of the Learned Commissioner of income-tax (Appeals) may be vacated and that of the Assessing Officer be restored. 04. The appellant crave5s leave to add, amend, alter or delete any of the above grounds of appeal during the course of appellate proceedings before the Hon'ble Tribunal." 4. In the above background, the rival parties have been heard. On behalf of the assessee a Paper Book has also been filed. The rival counsels have been heard and the relevant material perused. 5. In so far as Grounds of Appeal Nos. 1 and 2 in assessee's appeal are concerned; they are general in nature and do not require any specific adjudication. Accordingly, the same are dismissed. 6. Grounds of Appeal Nos. 3, 4, 5, 7, 8, 11 and 12 have not been pressed on behalf of assessee at the time of hearing and accordingl....
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....le of assets, interest on income-tax refund, etc. are liable to be excluded for computing net operating profit. Similarly, reference was also invited to Schedule 17 to the Profit & Loss Account containing details of 'other expenses' wherein it is pointed out that expenses on account of Exchange difference (net) was debited, which was not an operating expense, which was liable to be excluded to compute the 'operating profits'. Learned counsel for the assessee submitted that though the CIT(A) has agreed in-principle with the plea of the assessee however he has deemed it fit and proper to direct the Assessing Officer to consider such items and exclude them for the purposes of determination of PLI. In this context, o7u r attention was invited to para 5.5.2 of the order of the CIT(A), which reads as under :- "5.5.2. On the careful consideration of the facts as can be seen from the materials available on record that the TPO has computed the net margins as a PLI for financial analysis and benchmarking under the TNMM method. The appellant in the above submission has claimed that the computation made by the TPO suffers from some inherent defects and contradictions. Many cases have been re....
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....missions. The short point involved before us is the determination of net operating profits and operating revenues for the purposes of computing PLI of the assessee company. Inprinciple, we find no difference in approach between the assessee and the Revenue on the aspect of excluding any item of income or expenditure for the purposes of calculating PLI so long as such item of income/expenditure is not linked to the international transactions under review. We say so for the reason that even the TPO in para 8(v)(d) has concluded as under :- "Thus, the net profit margin normally means profit before tax, computed in accordance with the accounting principles. However, any item of income or expenditure which has no bearing on the amount of transactions under examination have to be excluded or included as the case may be. Some of these items may be as dividend income and interest income, which are not directly related to the transactions." 14. The stand of the CIT(A) on this aspect as manifested in para 5.5.2 of his order, which we have extracted above, is also on similar lines. The grievance of the Revenue, as manifested in the captioned Grounds of Appeal is also not against the afores....