TaxTMI 
TaxTMI 
TaxTMI 
2022 (4) TMI 1483
X X X X Extracts X X X X
X X X X Extracts X X X X
....at since the very basis for reference to the TPO itself is wrong, the TP proceedings should be quashed. 2. The Hon'ble DRP has erred in law and on facts in upholding the order of the TPO wherein Transaction Net Margin Method was selected as the most appropriate method for determining arm's length price for transactions relating to export of goods to associated enterprises and rejecting Cost Plus Method adopted by the appellant. 3. The learned DRP has erred in law and on facts in holding that the transfer pricing adjustment is applicable to sales made to Non-AE's also and not excluding the same while computing the quantum of TP adjustment. 4. The learned Dispute Resolution Panel [the `DRP'] and Transfer Pricing Officer [the 'TPO'J erred in law and on facts in rejecting all three comparable companies selected by your appellant i.e., Synthite Industries Limited, Infrag Limited and Surya Herbal Limited. 5. The Hon'ble DRP has erred in law and on facts in upholding the order of TPO in selecting Amrutanjan Healthcare Limited as a comparable company to your appellant's business though it is functionally dissimilar. 6. The learned DRP has erre....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ess: Other Income 37,469,207 Operating Income 1,655,822,100 Total Operating Cost 1,602,391,454 Less: Finance Cost 76,948,328 Donation 30,000 Provision for Doubtful debts 589,550 Provision for Doubtful advances 9,076,110 Operating Cost 1,515,747,466 Operating Profit 140,074,634 OP/OC 9.24% OP/OR 8.46% 5. The assessee filed TP analysis justifying the price it received for sale of its products to its AE as at arm's length. The assessee chose Cost Plus Method (CPM) as the most appropriate method (MAM) for determining the ALP. The assessee had chosen 3 comparable companies viz., Synthite Industrial Ltd., Surya Herbal Ltd., and Indfrag Ltd. The gross margins after adjustment towards depreciation was compared with the gross margins after depreication of the comparable companies and it was claimed by the assessee that the international transaction has been carried out at Arm's Length Price (ALP). 6. The AO made a reference to the Transfer Pricing Officer (TPO) under section 92CA of the Act for determination of ALP. The TPO rejected the RPM as the most appropriate method and chose ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....No.1 is concerned, it is the grievance of the assessee that the description of the assessee's business has been wrongly given. This may not have a very major impact and therefore no specific adjudication is required except to say that windmill parts and herbal products are poles apart. As far as ground No.2 concerned, at the time of hearing, learned Counsel submitted that identical issue considered by the Tribunal in assessee's own case in Assessment Year 2008-09 in IT(TP)A No.1197/Bang/2012 in the Tribunal by its order dated 08.05.2015 held that TNMM is the most appropriate method in the case of the assessee for determination of ALP. This order of the Tribunal was also followed by the Tribunal in Assessment Year 2009-10 in IT(TP)A No.61/Bang/2014 order dated 23.11.2016. We therefore dismiss ground No.2 raised by the assessee. 11. As far as ground No.4 raised by the assessee is concerned, the factual details are that the assessee had transactions with AE as well nonAE. The profit analysis of AE and non-AE segments are as follows: Particulars As Per TPO (Rs.) . Actuals - AE transactions (Rs.) Actuals Non AE transactions (Rs) Total (Rs.) Operating Revenue (OR) 1,66,24,14,8....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oosing comparable companies. The admitted position is that the turnover of both the aforesaid companies are more than 200 Crores which would be evident from the chart of comparables chosen by the TPO given in the earlier part of this order. This Tribunal has been consistently applying the turnover filter for the purpose of choosing comparable companies. 15. On the issue of application of turnover filter, we have heard the rival submissions. The parties relied on several decisions rendered on the above issue by the various decisions of the ITAT Bangalore Benches in favour of the Assessee and in favour of the Revenue, respectively. The ITAT Bangalore Bench in the case of Dell International Services India (P) Ltd. Vs. DCIT (2018) 89 Taxmann.com 44 (Bang-Trib) order dated 13.10.2017, took note of the decision of the ITAT Bangalore Bench in the case of Sysarris Software Pvt.Ltd. Vs. DCIT (2016) 67 Taxmann.com 243 (Bangalore-Trib) wherein the Tribunal after noticing the decision of the Hon'ble Delhi High Court in the case of Chryscapital (supra) and the decision to the contrary in the case of CIT Vs. Pentair Water India Pvt.Ltd., Tax Appeal No.18 of 2015 dated 16.9.2015 wherein it was h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssee being in that range having turnover of 8.15 crores, the companies which also have turnover of 1.00 to 200.00 crores only should be taken into consideration for the purpose of making TP study." 42. The Assessee's turnover was around Rs.110 Crores. Therefore the action of the CIT(A) in directing TPO to exclude companies having turnover of more than Rs.200 crores as not comparable with the Assessee was justified. As rightly pointed out by the learned counsel for the Assessee, there are two views expressed by two Hon'ble High Courts of Bombay and Delhi and both are nonjurisdictional High Courts. The view expressed by the Bombay High Court is in favour of the Assessee and therefore following the said view, the action of the CIT(A) excluding companies with turnover of above Rs.200 crores from the list of comparable companies is held to correct and such action does not call for any interference." 16. The Tribunal in the case of Autodesk India Pvt.Ltd. Vs. DCIT (2018) 96 Taxmann.com 263 (Bangalore-Tribunal), took note of all the conflicting decision on the issue and rendered its decision and in paragraph 17.7. of the decision held as that high turnover is a ground for excluding c....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... comparability of companies on the basis of turnover in Transfer Pricing cases. The decision was rendered as early as 5.8.2011. The decisions rendered by the ITAT Mumbai Benches cited by the learned DR before us in the case of Willis Processing Services (supra) and Capegemini India Pvt.Ltd. (supra) are to be regarded as per incurium as these decisions ignore a binding co-ordinate bench decision. In this regard the decisions referred to by the learned counsel for the Assessee supports the plea of the learned counsel for the Assessee. The decisions rendered in the case of M/S.NTT Data (supra), Societe Generale Global Solutions (supra) and LSI Technologies (supra) were rendered later in point of time. Those decisions follow the ratio laid down in Willis Processing Services (supra) and have to be regarded as per incurium. These three decisions also place reliance on the decision of the Hon'ble Delhi High Court in the case of Chriscapital Investment (supra). We have already held that the decision rendered in the case of Chriscapital Investment (supra) is obiter dicta and that the ratio decidendi laid down by the Hon'ble Bombay High Court in the case of Pentair (supra) which is favourabl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ommission should be 0.5%. Our attention was drawn to the decision of the Tribunal for Assessment Year 2009-10 in IT(TP)A No.61/Bang/2014, order dated 23.11.2016, in which the Tribunal held as follows: "We have heard the learned A.R. as well as learned D.R. and considered the relevant material on record. The assessee has furnished corporate guarantee of Rs.40,50,89,250 to bankers on behalf of the AEs. Since the assessee has not charged any fees or commission for providing the corporate guarantee the TPO/A.O. has determined the arm's length fees at 3% and made the adjustment on account of commission for guarantee. It is pertinent to note that this Tribunal in a series of decisions has taken a consistent view that providing corporate guarantee falls in the ambit of international transactions as per section 926(1) of the Act. The co-ordinate bench of this Tribunal of Hyderabad Bench vide order dt.28.3.2014 in the case of Four Soft Pvt. Ltd. Vs. DCIT in ITA No.1903/Hyd/2011 has taken a view that the guarantee fees for providing corporate guarantee should not be more than 0.5% in paras 24 to 26 as under : " 24. It is noted by the TPO/A.O., during the F.Y. 2005-06 the assessee ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Finance Act, 2012 with the insertion of Explanation I (c) with retrospective effect from 01/04/2002. Explanation (i)(c) to section 92B, reads as under: "capital financing, including any type of long-term or short-term borrowing, lending or guarantee, purchase or sale of marketable securities or any type of advance, payments or deferred payment or receivable or any other debt arising during the course of business." 25.3 A reading of the aforesaid clause from the Explanation would make it clear that the corporate guarantee provided by the assessee comes within the scope and ambit of 'international transaction' as per the aforesaid clause. Therefore, the contention of the learned AR that the issue is covered in favour of the assessee by virtue of the order passed in assessee's own case for AY 2006-07 no longer holds good since the order passed by the coordinate bench is prior to the amendment made to provision of section 92B of the Act. It will be pertinent to mention here that this issue was also considered by the ITAT bai Bench in case of Mahindra & Mahindra Vs. DCIT in ITA 97/Mum/2010, 54 SOT (UR) 146. The coordinate bench of this Tribunal while considering simila....