TaxTMI 
TaxTMI 
2021 (3) TMI 146
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....ed 'the Act') as per the directions of DRP. The Assessment Order for Assessment Year 2010 - 11 is dated 15.01.2015 and the Assessment Order for Assessment Year 2011 - 12 is dated 08.01.2016. Both these appeals are heard together and are being disposed of by way of this common order, for the sake of convenience. 2. In course of hearing, it was submitted by the learned AR of the assessee that in both these years, a common issue is involved regarding TP adjustment proposed by the TPO and confirmed by DRP and AO. He also submitted that in Assessment Year 2011 - 12, one more issue is raised by the assessee as per ground No.6 regarding disallowance of Rs. 2,20,040/- under section 14A of Income Tax Act, 1961 r.w.r. 8D of I.T. Rules, 1962 and be....
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....ropriate method (MAM) to evaluate the arm's length standard for the international transaction with its AE, PharmARC, Swiss and selected 5 Switzerland comparable service providers with the weighted arithmetic mean margin for 3 years at 10.40% on cost and in the international transaction with its AE, PharmARC, USA, the taxpayer selected 20 US comparable companies, with the weighted arithmetic mean margin for 3 years at 6.69%. Thereafter, he pointed out that in para 6.3 of his order, the TPO has observed that in view of the facts that the tax payer has selected foreign companies for comparison under TNMM and for the reasons mentioned in the show cause notice dated 12.12.2013, the TPO rejected the TP study. Thereafter, he pointed out that the s....
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.... the most appropriate approach and permitted under the Indian TP regulations. He submitted that under these facts, TP study carried out by the assessee should be accepted and the TP adjustment proposed by TPO and accepted by DRP and AO should be deleted. Reliance was placed by him on the Tribunal order rendered in the case Ranbaxy Laboratory Ltd., Vs. ACIT as reported in 110 ITD 428 and he pointed out that reliance on this Tribunal order was placed before the TPO also in the same letter dated 09.01.2014 and in this regard, he drawn our attention to page 172 of the Paper Book. He further submitted that the relevant para of this Tribunal order has been reproduced by the assessee in that reply and it is available on page 174 of the Paper Book.....
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....ing a contrary mandate of the TP provisions of other countries and reading it into our provisions is not permissible" Therefore, the objection is rejected." 4. He submitted that in the present case, the Tribunal order cited by him having been rendered in the case of Ranbaxy (supra) should be followed. He further submitted that on page 4 of its order, the DRP has stated that as per Tribunal order rendered in the case of 24/7 Customer.com Pvt. Ltd., in ITA No.227/Bang/2010 dated 09.11.2012 and in the case of Customer Services (India) Pvt. Ltd., Vs. ACIT (2009-TIOL-424-ITAT-DEL), current year data should be adopted and the earlier year data should be rejected. He submitted that in the present case also, the TPO may be directed to a....
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....ing of foreign AEs is more complex. 6. We have considered the rival submissions. First of all, we reproduce paras 7.1 to 7.3 from the direction of DRP in Assessment Year 2010-11. These are as under: "7.1 Foreign Tested Party ought not to be rejected: Rejection of foreign tested party is unjustified. Accordingly, The arm's length comparability analysis using the associated enterprises as tested parties as per the transfer pricing documentation ought to be accepted. 7.2 It is seen that the Assessee has chosen its subsidiaries M/s PharmARC Inc USA and M/s. PharmARC, its own AEs as tested parties for TP analysis and the same was rejected by TPO. 7.3 This Panel is not able to accept the objection regarding rejec....
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.... the foreign AEs are paid 5% mark up and therefore, even if in the comparable cases, no mark up is paid by the customers of such uncontrolled comparables, then also, 5% mark up paid by the assessee in the present case will be within ALP as per 2nd proviso to section 92C(2) in which it is specified that if the variation between the Arm's Length Price and price at which international transaction has actually been undertaken does not exceed 5% of transaction price, there should not be a T P adjustment. So in the present case, if cost incurred is 100, the assessee is paying 105 after 5% mark up and therefore, even if in the case of the comparable, the payment is made of Rs. 100/- without any mark up then also the payment made by the assessee af....