2021 (4) TMI 1023

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....se and in law, the Ld.CIT(A) has erred in deleting the addition of Rs. 7,32,39,369/- on account of adjustment in Arm Length . 2. The Ld. CIT(A) has erred by not allowing an opportunity to the AO/TPO while considering the fresh submissions before the CIT(A). While the need of these details were mentioned in the AO/ TPO order. Thus, it is not as per the Rule 46A. 3. The CIT(A) has erred by not allowing an opportunity to the AO/TPO while considering the fresh submissions before the CIT(A), while the need of these details were mentioned in the AO/TPO order. Thus, it is not as per the Rule 46A. 4. The CIT(A) has erred by not considering the finding of the TPO that documents provided by the assessee before the TPO does ....

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.... by the Assessee u/s 46A of the Act while accepting the Net margin of the comparables at 9.66%. 5. The CIT(A) has erred by not calling a remand report from the AO/TPO while considering fresh submission from the Assessee while accepting the Net Margins the assessee (After excluding the abnormal losses) at 12.71%. This is violation of R 46A. 3. The assessee is a company engaged in the business of developing package software and providing software consulting services primarily for the use in delivery communication Industry. The assessee during the relevant previous year has entered into the following international transactions: S. No. Description of transaction Method Used Value (In Rs.) 1 Sale of Software develop....

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....r dated 29/12/2006 thereby assessing total income at Rs. 19,39,43,196/-. 4. Being aggrieved by the assessment order, the assessee filed appeal before the CIT (A). The CIT (A) partly allowed the appeal of the assessee. 5. The Ld. DR submitted that the CIT (A) erred in not allowing an opportunity to the Assessing Officer /TPO while considering the fresh submission before the CIT(A). Thus, the admission of the additional evidence/details is not as per Rule 46A. The Ld. DR further submitted the CIT(A) erred by not considering the finding of the TPO with documents provided by the assessee before the TPO as the same does not provide terms and conditions such as payment terms, service level agreement and qualification of assessee's power dep....

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....of the assessee was rejected by the TPO. Against the order of the TPO, the assessee claimed the adjustment before the CIT(A) and filed revised calculation of adjusted margin and adjusted margin was calculated at 12.71%. The Ld. AR submitted that claim of comparability adjustment was not made for the first time before the CIT(A) and only the calculation of the amount of adjustment was revised. The Ld. AR further submitted that no additional evidence was filed by the assessee before the CIT(A) and the CIT(A) has powers for allowing the claim of the assessee. The Ld. AR relied upon the following decisions wherein it has been held that the powers of the CIT(A) are co-terminus with that of the assessing authority: a) Jute Corporation of....

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....tions as a valid CUP. During the relevant previous year the assessee had generated billed man-month of 208 while the idle time of the people was 223 man-month. Accordingly, out of total billable 431 man months, only 208 man months were billed by the assessee. Therefore there was idle capacity to the extent of 51%. After making adjustment on account of idle employee cost the adjusted operating margins of the assessee is work out at 45.87% which is more than the arithmetic mean margin of the comparables companies at 15.49% (corrected margin 9.66%). Thus, this does not warrant any transfer pricing adjustment in respect of international transactions undertaken by the assessee. The Ld. AR further submitted that in terms of Rule 27, the assessee ....

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....panies identified by the TPO, in my considered view, would go against the true intention of the transfer pricing regulations. Such adjustments to the operating margin of the appellant are, thus, required so as to eliminate the difference between the appellant and the comparables. 9.6 Considering the operating profit margin of the appellant computed after excluding the abnormal cost / loss, at 12.71% as against the operating profit margin of the comparable companies identified by the TPO (after correctly computing the operating profit margin) at 9.66%, the adjustment made by the TPO, on account of the difference in the arm's length principle of the international transactions does not survive. In my considered view, even if the opera....