TaxTMI 
TaxTMI 
2016 (5) TMI 1491
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....ntered into by the assessee are on account of provision of marketing and sales support, provision of assembly and delivery management support services, provision of repairs and maintenance of marine equipment and provision of business promotion and liaison services. The assessee had bifurcated its activities into four segments as follows: (i) After sales service, (ii) Assembly and delivery management support services (iii) Marketing, sales support coordination and other allied activities, (iv) Application engineering services The assessee had benchmarked its transactions by using TNMM in respect of Sl. No. (ii), (iii) and (iv). As regards sales services segment it used CUP method. The AO made a reference to the Transfer Pricing Officer (TPO) for determining the Arm's Length Price (ALP) of the transactions as per provision of Sec. 92 of the Act. During the TP proceedings the TPO found that the Profit Level Indicator (PLI) was net operating profit to operating cost (OP/OC), that for assembly and delivery management services, the assessee had selected following six comparables: S.N. Name of the Comparable Company PLI as per TP Report (%) Updated PLI 1. Anup Malleable Ltd....
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....of sales 48081036 95% 43501889 Adjustment 3665159 As a result, he proposed an adjustment of Rs. 36.65 lakhs. Following the order of the TPO, the AO made an addition of the said amount in his draft order. 3. Aggrieved by the order of the TPO/AO the assessee filed objections before the DRP. Before it, the assessee argued that it was a contract service provider, that the AE would sell its products to third party in India, that the contract would be entered into between the third party and AE directly, that the assessee would be sub-contracted the manufacturing and assembling work in respect of such contract entered into by the AE with the third party, that the manufacturing and assembling work was carried out in accordance with the specification provided by AE, that the goods were delivered by assessee to third party customer in India, that it was not responsible for any risk or loss or damage of goods once the same was offered for transport, that it had characterised its activity in the segment of assembly and delivery management as that of contract manufacturing (CMf), that it had identified other companies that were engaged in providing CMf services or products that were br....
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....could not submit new set of comparable at the appellate stage, that the remaining two comparables (Anup Malleables Ltd. & De Two Forging Pvt. Ltd.) were functionally similar to the assessee. After examining the remand report, the DRP held that the TPO had failed to address the core issue on which the report was called for, that he again and again reiterated the point that two comparables finally accepted by him were the valid comparable to determine the ALP, that he failed to address the issue as to why the four comparables were rejected when they were performing the same job as that of the remaining two, that the remaining two comparables suffered the same infirmity of the rejected four comparables, that he had failed to address the issue of comparability of six new comparables identified by the assessee, that he had failed to avail the opportunity given to him, that it was not possible to condone the approach of the TPO in accepting/in rejecting the comparables. The DRP held that the new comparable identified by the assessee were found to be engaged in manufacturing of product that are more similar to the assessee, that the assessee's margin was better than the average margi....
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....w material the affected party should be given an opportunity to rebut such material. The DRP had given a reasonable opportunity to him. But, instead of availing and making a positive contribution he stuck to the two comparables that were endorsed by him for computing ALP. If we take into consideration the behavior of the TPO, it becomes clear that he was not following the mandate of Chapter-X of the Act. It appears that he had decided to make adjustment at any cost. Therefore, he sidelined the basic issue raised by DRP and did not offer any comment of new comparables. Therefore, we have no hesitation to hold that DRP had rightly and justifiably held that the approach of the TPO was 'illogical' and 'inconsistent'. As far as admission of additional evidence/new evidence is concerned we are of the opinion that the DRP being an appellate authority has all the powers as that of the CIT(A). The proceedings before the DRP is an extension of the assessment proceedings and admitting additional evidence is part of the powers of the DRP. We find that in the case of Lahmeyer Holding Gmbh (W.P.) C-7417/2012 and CM No.1879/ 2012) the Hon'ble Delhi High Court has held as unde....