AI Drafter 
TaxTMI 
TaxTMI 
2019 (12) TMI 1154
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....ting to Rs. 54 lakhs and sustaining disallowance only to the extent of Rs. 24 lakhs, without appreciating the position of law?" 2. "Whether the CIT(A) erred in restricting the addition u/s 2(22)(e) to Rs. 24 lakhs out of loans of Rs. 78 lakhs without appreciating the fact the lender company M/s. Pwertel India Pvt. Ltd. has accumulated profit of Rs. 1,08,48,212/- for the year?" The appellant prays that the order of the CIT(A) on the above grounds above be set aside and that of the ITO/AC/DCIT be restored. 4. It transpires that tax effect in this appeal by the revenue is below the limit of rupees 50 lakhs fixed by the CBDT for filing appeals before the ITAT by circular No. 17/2019 dated 8.8.2019. It has not been shown to us that this appeal falls in any of the exceptions mentioned in the said circular. In this view of the matter appeal by the revenue stand dismissed in limine on account of tax effect. 5. One issue raised in assessee's appeal ITA No. 410/Mum/2015 for assessment year 2009-10 is that the learned CIT(appeals) has erred in taxing intercompany deposit as deemed dividend of the assessee who is neither a registered shareholder not a beneficial shareho....
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.... A.Y. 2008-09, the TPOs and the CIT(Appeals) had calculated the profits at 6%.on the cost actually incurred by the appellant, and that in order to maintain consistency the same should have been followed for the relevant year too, especially considering that the facts and circumstances for the relevant year and earlier years were exactly the same. A.Y. 2010-11 :- 1. The learned CIT(Appeals) has erred in law and on facts and circumstances of the case in confirming the adjustment to the transfer price to the tune of Rs. 4,42,96,836/- and enhancing the assessment accordingly. 2. The learned CIT(Appeals) has erred on facts and in law in upholding the comparables as taken by the TPO in the earlier year to be the comparables for the relevant year without conducting any fresh search for data of the relevant year. 3. The learned CIT(Appeals) has erred on facts and in law in upholding the comparables taken by the AO of the earlier year and hence carrying forward the inconsistencies of the earlier year which were pointed out by the appellant in the earlier year's search and which inconsistencies were not addressed by the TPO in the earlier year's or....
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....d 98,337,700 External TNMM 3 Advances received against future sales Cherokee International Corporation 722,764 CUP TPO discussed the transfer pricing study report filed by the appellant before him. He quoted the Function, Asset and Risk Analysis of the assessee as per study report in paragraph 6 of his order. Discussing the methodology he observed that according to the TP Study Report, the OEGD guidelines state that the transactional profit method should ideally be applied on a transaction-to-transaction basis, but in appropriate situations transactions may be grouped or aggregated (see Rule 10A(d)/OECD at 1.42 to 1.44). Essentially, the relevant controlled transactions may best be aggregated if it is impractical to analyze the pricing or profits of each individual transaction, or if such transactions: are so interrelated that this is the most reliable means of benchmarking the outcome-of the transactions against an arm's length outcome. In light of this discussion, the assessee has grouped all its international transactions and has benchmarked them using external TNMM as the most appropriate method considering itself as a tested party. It has selecte....
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....t in India. Hence, the profit earned by the parent company on account of locational savings should be attributable to the Indian entity. The profit of 6% on cost is as per the mutual agreement between the assessee and is associated enterprise. Now, assessee has agreed that its profit should be 6% of expenses incurred by it that is total cost less cost of a material. As assessee itself admits that the profits of the assessee should not be less than 6% of cost as it is the minimum markup assessee and its AE have agreed upon." 14. The above Transfer Pricing adjustment was upheld by the learned commissioner of income tax appeals, upon assessee's challenge to the same. 15. Against this order assessee is in appeal before the ITAT. We have heard both the counsel and perused the records. The learned counsel of the assessee reiterated the submissions as above, before the Assessing Officer. He submitted that there should be only 6% markup on the expenses incurred by the assessee. In this regard he referred to the mutual agreement between the assessee and its associated enterprise. In this regard on enquiry from the bench as to what is the agreement learned counsel of the assessee submi....
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.... reward all these factors have to be cumulatively taken note of. As rightly pointed out by the tax authorities, in the case of a contract manufacturer it is unthinkable for a manufacturer to agree, in writing, to carry on the business so as to end up in losses. Assessee having not taken actual cost into consideration, TPO/Assessing Officer, as well as the learned CIT(A), have correctly noticed that either under TNMM or under cost- plus method the cost of goods supplied should be taken into consideration. It also deserves to be noticed that the mark-up of 6% has not been disputed by the tax authorities. 9. Learned Counsel, appearing on behalf of the assessee, submitted before us that in order to disregard the method followed by the assessee, the burden is upon the TPO to prove that the uncontrolled transactions are not comparable and in this regard he relied upon the decision of ITAT, Mumbai Bench in the case of C.A. Computer Associates Pvt. Ltd. (supra). In our opinion, the decision rendered in the aforecited case is confined to the facts therein; since parameters prescribed in Rule 10B, vis-à-vis bad debts written off, were not taken into consideration the Tribunal....
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....ning the ALP the TPO has adopted a mark up of 6% on the on the cost incurred by the assessee which include purchase of raw material of Rs. 9,09,54,952/-. The said raw material was supplied by the AE of the assessee free of cost. Thus, TPO calculated the TP adjustment of Rs. 2,33,24,680/- as per following calculations: ALP margin to be earned by the assessee 6% ALP of the assessee 106% of the expenditure Rs. 14,76,33,337/- Arms Length price 106% x 147633337 15,64,91,337/- Price received by the assessee 13,31, 66,657 /- Shortfall being the adjustment u/s. 92CA 2,33,24,680/- 2.2 The TP adjustment made by the AO was agitated in an appeal filed before Ld. CIT(A). It was submitted that treatment adopted by the TPO for calculating 6% mark up on the cost is different from the treatment adopted by TPO in respect of immediate preceding year, wherein while calculating the cost the raw material supplied by AE free of cost was excluded. Ld. CIT(A) after going the submissions of the assessee found that for immediate preceding year i.e. for A.Y 2007-08 TPO while calculating 6% mark up had excluded the value of purchase of raw material and 6% mark up was calc....
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....and their contentions have carefully been considered. We have carefully gone through the order passed by TPO in respect of A.Y 2007-08. Ld. CIT(A) has calculated the TP adjustment in accordance with the course of action adopted by the Department in respect of immediate preceding year i.e. for assessment year 2007-08. In our view Ld. CIT(A) did not commit any error in determining the arm's length price. The impugned transaction is in accordance with the view point taken in respect of A.Y 2007-08 as it is in accordance with the principle of consistency, which is applicable to the Income-tax cases as per decision of Hon'ble Bombay High Court in the case of CIT vs. Gopal Purohit,336 ITR 287(Bom), wherein their Lordships have held that there ought to be uniformity in treatment and consistency when the facts and circumstances are identical, particularly in the case of the assessee. In this case also, what Ld. CIT(A) has done is that he has brought uniformity in the treatment and consistency to bring the TP adjustment at par with the treatment adopted by the Department in respect of assessment year 2007-08. For the sake of completeness we may mention that in A.Y. "Total cost as....