2022 (1) TMI 345

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.... against the making of transfer pricing adjustment amounting to Rs. 1,73,70,067/-. 3. Tersely stated, the facts of the case are that the assessee is an Indian Company engaged mainly in providing Engineering services. A return was filed along with Form No.3CEB declaring certain international transactions. The Assessing Officer (AO) made a reference to the Transfer Pricing Officer (TPO) for determining the Arm's Length Price (ALP) of the international transactions. The assessee received a sum of Rs. 25,37,21,315/- in the international transaction of "Provision of Engineering services"; Rs. 7,87,230/- from `Provision of accounting services'; Rs. 4,34,600/- from `Provision of management services'. In addition, the assessee paid `Consultancy an....

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....services amounting to Rs. 25.49 crore to its United States AE. Simultaneously, it also provided similar services in domestic market as well as other AEs in Europe with revenue at Rs. 13.30 crore and Rs. 49.00 crore respectively. Apart from that, the assessee also undertook trading activity with revenue of Rs. 21.10 crore. Though accounts were maintained in a consolidated manner, the assessee, for the purposes of benchmarking, worked out the PLI separately from services rendered to AE services; rendered to non-AE services; and trading. The details of such operating profit determination have been placed at page 173 of the paper book. The TPO did not accept the assessee's bifurcation of costs as allocated to the AE segment by observing that th....

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.... of Costs and determination of the PLI from services AE and services non-AE segments. The view point that hourly rate charged to AEs and non-AEs was different as was reflected from sample invoices does not justify rejection of the separate determination of operating profit from different segments. If the AEs has been charged at the higher price vis-à-vis the non-AEs for which respective invoices have been issued, there can be no reason to reject the separate profits. Even if the assessee had maintained separate accounts and booked such revenue on the basis of invoices at different rates between AEs and non-AEs, the situation would not have been any different. The other view point of the TPO that the expenses were not allocated on act....

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....e other point of view taken by the DRP is that though the assessee initially mentioned in its transfer pricing study report that the purchase of software was also part of the services segment, but the same was eventually ignored. It is seen that such software was purchased by the assessee from its AE at Rs. 36,82,882/-, which was eventually sold at Rs. 1.55 crore. Logically, the purchase and sale of software ought to have been part of trading segment of the assessee and not the services segment. Though the assessee mentioned in its Transfer pricing study report that the purchase of software was considered for benchmarking the Service segment, but the transaction of purchase of software was not taken into consideration at the time of benchma....