2013 (4) TMI 935

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....he assessee's income on account of transfer pricing, ignoring the fact that the assessee has not satisfactorily explained the low profit margin of 3.51% as against comparables of 20.42%. b) On the facts and in the circumstances of the case, the ld Commissioner of Income Tax(Appeals) erred in holding that there is a palpable mistake apparent from record in the order u/s 92CA(3) passed by the TPO." 3 Ground no. 1 is regarding addition of telephone expenses on account of personal use. 3.1 The assessee has claimed an expenditure of Rs. 28,31,990/- towards communication charges which includes an amount of Rs. 16,91,141/- towards reimbursement of telephone expenses to its employees for use of mobile phone and residential telephone lines. The Assessing Officer held that the reimbursement has some element of personal expenses and accordingly disallowed 40% of such reimbursement made by the company. 3.2 On appeal, the Commissioner of Income Tax (Appeals) has deleted the addition made by the Assessing Officer after examining the records. 4 We have heard the ld DR as well as the ld AR of the assessee and considered the relevant material on record. The ld DR has submitted ....

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....is regarding transfer pricing adjustment. 6.1 The assessee company is engaged in the activity of research, marketing and consultancy. During the financial year relevant to the assessment year under consideration, the assessee entered into international transaction with its AE namely Gartner Ireland Limited (GIL) for providing research support services (gathering, collecting of relevant data used for preparing research reports). The Assessing Officer made a reference u/s 92CA(1) of the I T Act to the Transfer Pricing Officer(TPO) for determining the Arm's Length Price (ALP) in relation to the international transactions. The assessee filed its TP study and determined the ALP by applying TNMM as the most appropriate method by using net cost plus mark-up as Profit Level Indicator (PLI), the assessee arrived at arithmetic mean at 9.63% in comparison to assessee's own net cost plus mark up at 7.91%. Accordingly, the assessee claimed that its transactions are at ALP as the same are within the range of (+) (-) 5% of arithmetic means of the comparable price. The assessee took 10 comparables for bench marking its international transactions. The TPO has determined the net cost plus margin ....

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....has no jurisdiction to conduct a fresh search when the comparables selected by the assessee were not rejected by the TPO. Without rejecting the TP study of the assessee, the TPO cannot take afresh search and include the comparables. The TPO has also not pointed out any defect in the TP study or comparables taken by the assessee and therefore, as per the provisions of Transfer Pricing, the TPO is not justified in ignoring the comparables of the assessee and taking fresh comparables into consideration. He has further contended that the assessee was not given an opportunity to raise the objections against the comparables selected by the TPO. Even the details and the list of 102 comparables given in the Annexure-I to the TP order was not supplied to the assessee. The said Annexure was not produced before the Commissioner of Income Tax(Appeals) despite a specific direction was given to the Assessing Officer/TPO vide order dated 30.12.2008. 7.3 The ld AR has relied upon the order dated 9th Nov 2011 of the Tribunal in the case of M/s Maersk Global Services Canter (I)P Ltd in ITA No.3774/Mum/2011 and submitted that the Tribunal has held that it is not open to the TPO to exclude the comp....

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....d. It is apparent from the TP order that explicitly, the TPO has not rejected the comparables of the assessee; but while determining the ALP the TPO has taken up its own comparables by ignoring the comparables of the assessee. 8.1 In such a situation, when the TPO has not specifically rejected the comparables of the assessee, then while computing the ALP, the comparables selected by the assessee as well as the comparables further added by the TPO should have been taken into account. The ld AR has forcefully contended that the TPO has no jurisdiction to embark a fresh search without rejecting the comparables of the assessee. We do not agree with the contention of the ld AR; because as per the provisions of sec. 92CA(3), the TPO has jurisdiction/power to gather and consider all relevant material and information apart from the evidence, information and documents produced by the assessee as required u/s 92D(3) to determine the ALP in relation to the international transaction. 8.2 Sub sec. (7) of sec 92CA stipulates that the TPO, for the purpose of determining the ALP can exercise the powers as specified in clause (a) to (d) of sub.sec. (1) of sec 132 or sub.sec. (6) of sec 133 or....