AI Drafter 
TaxTMI 
TaxTMI 
2019 (5) TMI 951
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....the Transfer Pricing Officer (TPO)/the second respondent, for a proper determination of the Arm's Length Price (ALP) of transactions. The petitioner followed the Transactional Net Margin Method (TNMM) to arrive at the proper ALP on segmental basis. The TPO issued a show cause notice on 04.01.2016 proposing to reject the methodology adopted by the petitioner for the reason that the segmental profit and loss had not been disclosed as part of the financial statements and were also not certified by an external Chartered Accountant. 4. Despite objections filed to the show cause notice, the TPO passed an order dated 27.01.2016 making an adjustment of an amount of Rs. 63,47,73,087/- on the reasoning that voluminous documents had been produced by the petitioner in support of its stand and that it was not 'humanly verifiable' with the time available for completion of Transfer Pricing proceedings. He states as much in the order at paragraph 5.11: '5.11 The assessee's plea that Rs. 56.3 crores consisted of exports to AE cannot be accepted in the absence of a full proof verification with reference to export invoices. It was admitted by the assessee that there are as man....
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.... INR) Operating cost A 3234621949 Arm's Length mark-up B 8.95% Arm's length revenue C=A + (A+B) 3,524,120,613 Revenue as recorded in P & L D 2863861526 Difference E = C - D 660,259, Proportion of AE revenue to total revenue F 96.14% Adjustment G = E * F 634,773,087 6. A draft assessment was made by the AO on 16.03.2016 adopting the Arm's Length Price as determined by the TPO. The adjustment of Rs. 63,47,73,087/- was added back to the total income and as against the same, objections were filed before the Dispute Resolution Panel. Along with the objections, a petition was filed for admission of additional evidence. The petitioner explained that the TP adjustment arose from a difference in methodology of accounting followed by the petitioner viz-aviz that followed by the AE. The petitioner followed the accounting year between 1st of April to the 31st of March of the subsequent year, whereas the AE followed the accounting year 1st January to 31st December of the calendar year. 7. The petitioners' case was that, inadvertently, the sales in the quarter between January to March 2011 had been included in the s....
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....mistake in the sales figure for the quarter January-March 2011 being included in the saes for the F.Y. 2011-12, there is also mistake in the cost figures adopted in the uncertified segmental financials filed during T.P. assessment proceedings. During the hearing on 8-11-2016 the ARs filed an item-wise break-up for the cost figures adopted by it. 4.5. The assessee, vide its letter dated 10-11-2016 (copy enclosed) has claimed that "once the audited segment is considered the AE segment of MCPL (10.1%) will be ALP viz-a-viz its non-AE export margins (3.21%) and external comparable margins (8.95%). 4.6 On facts, the claim of the assessee appears to be correct. Therefore DRP may decide whether the revised segmentation and the certification done after the completion of TP assessment proceedings can be accepted. If accepted then the adjustment of Rs. 63,47,73,086 will become NIL.' 9. The conclusion of the AO appears to indicate, on verification of the invoices filed, that the transaction details did tally with the claim of the petitioner. The AO then, in the light of his confirmation of facts, places the matter for consideration before the DRP to decide whether, in....
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....at nascent stage in India. Often the Assessing Officers and Transfer Pricing Officers tend to take a conservative view. The correction of such view takes very long time with the existing appellate structure. With a view to provide speedy disposal, it is proposed to amend the Income-tax Act so as to create an alternative dispute resolution mechanism within the income-tax department and accordingly, section 144C has been proposed to be inserted so as to provide inter alia the Dispute Resolution Panel as an alternative dispute resolution mechanism.' 12. The intent and purpose of constituting the DRP, with three high ranking Commissioners that have exclusive jurisdiction for the said purpose, is to provide effective and speedy resolution of transfer pricing disputes. The DRP is thus expected to use every measure possible to resolve a dispute before it. The DRP, in the present case, rejects the petitioners' claim solely on the reasoning that the report of the TPO was incomplete. If at all further information was required, the DRP is expected to have called for the said information to equip itself with the necessary material to come to a reasoned conclusion. Needless to state....