TaxTMI 
TaxTMI 
2022 (4) TMI 1483
X X X X Extracts X X X X
X X X X Extracts X X X X
.... referring the case to the TPO. It is prayed that 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 busine....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r for the Asst Year 2012-13 Particulars Amount Amount Total Operating Income 1,693,291,307 Less: 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). ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tice that consequent to rectification order passed, the OP/OC collected by the TPO at 23% as per the order under section 92CA of the Act was reduced to 18.48% in a rectification order dated 17.12.2018. By the very same order, the margins earned by the assessee was computed at 9.68% OP/OC. 10. We shall now deal with each of the grounds raised by the assessee. As far as ground 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 rais....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... therefore of the view that it would be just and appropriate to remit the issue regarding comparability of the aforesaid 2 companies Indfrag Ltd., and Surya Herbal Ltd., for consideration denovo. 14. As far as ground No.6 is concerned, the assessee seeks exclusion of AVT Natural Products Ltd., and Shilpa Medicare Ltd., as comparable companies. In this regard, we find that the TPO in selecting comparables has applied a filter of companies with turnover range of one Crore to 200 Crores for choosing 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 Se....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ation of companies on the basis of net sales or turnover, we find that a reasonable classification has to be made. Dun & Bradstreet & Bradstreet and NASSCOM have given different ranges. Taking the Indian scenario into consideration, we feel that the classification made by Dun & Bradstreet is more suitable and reasonable. In view of the same, we hold that the turnover filter is very important and the companies having a turnover of Rs.1.00 crore to 200 crores have to be taken as a particular range and the assessee 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 a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... decision rendered in the case of Genisys Integrating (supra) by the ITAT Bangalore Bench should continue to be followed. Since arguments were advanced on the correctness of the decisions rendered by the ITAT Mumbai and Bangalore Benches taking a view contrary to that taken in the case of Genisys Integrating (supra), we proceed to examine the said issue also. On this issue, the first aspect which we notice is that the decision rendered in the case of Genisys Integrating (supra) was the earliest decision rendered on the issue of 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 (supr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e amount Rs. 29,63,14,659/- Commission on Corporate Guarantee @ 3% Rs. 88,89,439 ALP of Corporate guarantee compensation / commission @ 3% Rs. 88,89,439 The amount of Rs. 88,89,439/- is the adjustment u/s 92CA of the Income Tax Act, 1961 in respect of the International transaction for financial /corporate guarantee fee." 21. The DRP confirmed the order of the TPO. At the time of hearing, it was brought to our notice that in assessee's own case for Assessment Year 2011-12, this Tribunal directed that the percentage of guarantee commission 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ffect from 01/04/2002, the corporate guarantee provided by the assessee is to be considered as an international transaction, and, therefore, the Assessing Officer was justified in determining arm's length price of such transaction. 25.2 Having considered the submissions of the parties, we are unable to accept the contention of the learned AR that corporate guarantee of the nature provided by the assessee will not come within the meaning of international transaction in terms with section 92B of the Act. It is not disputed that section 92B of the Act has been amended by the 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 &#....