TaxTMI 
TaxTMI 
TaxTMI 
2021 (6) TMI 1134
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.... determined. The assesse filed a Transfer Pricing study in support of its claim that the transactions with AE were at arm's length. A copy of the transfer pricing analysis by the assessee is at pages 109 to 159 of the assessee's Paper Book. In the Transfer Price Study (TP study), the assesse had only listed out software development services as an international transaction and justified the price by adopting Comparable Uncontrolled Price (CUP) as the Most Appropriate Method (MAM). The breakup of the revenues of the assessee on software development services, manpower supply and training services as per the TP study was as follows: Particular Amount in Rs. Remarks Software Manpower Training Total Revenue 169,162,021 542,255,226 1,604,560 713,021,807 Training Revenue included in other income Less: Direct Cost as per the Cost center 96,962,182 424,168,510 853,000 521,983,692 Management Salary apportioned based on the Turnover 9,922,419 31,806,686 94,118 41,823,222 Administration cost apportioned based on the Turnover 9,519,086 30,513,788 90,292 40,123,166 ....
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.... enhance the income of the assessee by Rs. 4,20,60,956/- on the issue u/s 92CA." 5. The AO passed the draft assessment order incorporating the additions suggested by the TPO. The assessee filed objections before the Disputes Resolution Panel (DRP). The DRP confirmed the order of the TPO. The AO passed the final Order of Assessment as per the directions of the DRP. Against the final Order of Assessment, the assessee has preferred the present appeal before the Tribunal. 6. The assessee has raised many grounds of appeal challenging the comparables chosen by the TPO and the selection as the MAM. However, at the time of hearing, the learned Counsel submitted that the ground Nos.6 and 12 are decided and other grounds would not be pressed. 7. Ground No.6 raised by the assessee reads as follows: "6. Without prejudice to the above, the authorities below while adopting the TNMM Method have erred by making an adjustment u/s. 92CA of the Act on the whole Operating Cost incurred by the eligible Assessee without making a bifurcation between the Related Party transactions and non-related party transactions, failing to appreciate that the same is contrary to the directions of the Hon'....
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....g Cost 116,403,686 174,209,231 1,037,409 .36 Operating Profit 52,758,335 13,468,591 567,150.64 Operating Profit % 31.19% 7% 35% Operating profit - Sales to Related party transaction Particular Amount in Rs. Software development Manpower Supply Training Revenue - 79,829,404 - Less: Direct Cost as per the Cost center - 54,477,853 - Management Salary apportioned based on the Turnover - 4,682,498 - Administration cost apportioned based on the Turnover - 4,492,161 - Total Operating Cost - 63,652,511 - Operating Profit - 16,176,893 - Operating Profit % - 20% - Operating profit - Related party purchase Particular Amount in Rs. Software development Manpower Supply Training Revenue - 274,748,000 - Less: Direct Cost as per the Cost center - 217,050,920 - Management Salary apportioned based on the Turnover - 16,115,701 - Administration cost appo....
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....he company is predominantly engaged in Onsite development of software abroad(outside India), further, the comparables selected by the TPO are also having the companies which have onsite and off-shore revenues. Thus, the above objection is not: found acceptable, however, the objections with regard to specific comparables selected by the TPO are discussed and decided subsequent paragraphs." 13. Learned Counsel for the assessee submitted that the addition can be made only in respect of transactions with AE and not with unrelated parties and in this regard, he placed reliance on the decision of the ITAT in assessee's own case for Assessment Year 2009-10 in IT(TP)A No.158/Bang/2014 order dated 30.09.2014. The relevant portion of the observations of the Tribunal were as follows: "As far as this ground is concerned, the value of the international transaction between the assessee and its AE- PTI is a sum of Rs.20,07,38,607/-. The TPO however applied the AM of the comparables on the total turnover of the assessee which includes transactions with non-AE also. The adjustment have been clone by taking transactions at the entity of transaction with the AE. The adjustment done by the TPO are....
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....her than not adjudicating even on the principle. We are therefore of the view that in principle we agree to the proposition put forward by the assessee in ground No.6. We, however, remand the issue to the AO/TPO to call upon the assessee to given the correct figures based on certificate from the auditor and thereafter make adjustment in respect of ALP only in respect of transactions with AE. Thus, the ground of appeal is treated as allowed for statistical purposes. 16. The next ground that requires adjudication is ground No.12. The issue raised in Gr.No.12 is that the TPO has erred in treating the Exchange fluctuation gain amounting to Rs.1,34,61,664 as non-operating in nature and excluded the same from computation of Operating margins of the eligible Assessee while computing the arm's length price of the international transactions. As far as ground No.12 is concerned, the plea of the assessee was raised in the form of additional ground before the DRP and the DRP dealt with the same in the following manner. "12.3 Additional Ground of Objection The learned TPO has erred in treating the Exchange fluctuation gain amounting to Rs.1,34,61,664 as non-operating in nature and ex....