TaxTMI 
TaxTMI 
2021 (6) TMI 1134
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....espect of international transaction had to be 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 ....
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....5% of the International Transaction, adjustment is made The above shortfall of Rs. 4,20,60,956/- is treated as transfer pricing adjustment u/s 92CA in respect of software development segment of the taxpayer's international transactions. 13. In view of the above order the assessing officer shall 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 authoritie....
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....y Training Revenue 169,162,021 542,255,226 1,604,560 Less: Direct Cost as per the Cost center 96,962,182 424,168,510 853,000 Management Salary apportioned based on the Turnover 9,922,419 31,806,686 94,118 Administration cost apportioned based on the Turnover 9,519,086 10,561,,007.21 90,291.81 Total Operating 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 - &nbs....
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....assessee did not have any related party transactions in the Software development segment. 12. The DRP dealt with the aforesaid objections in the following manner: "Having considered the submissions, is noticed by us that the assessee has not maintained separate segmental details for the onsite operations in its annual reports and only now claimed, based on its internal reports that too without any certificate from an auditor, that the comparison should be made in respect of AE segment only and further, in the absence of similar details of segmental information for the comparable companies, it would not be possible to adopt such a comparison at micro level. Further, the assessee failed to substantiate before us that the 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 ca....
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....ed DR relied on the directions of the DRP. 15. We have considered the rival submissions. The contention of the assessee is primarily acceptable and the decision cited by the learned AR in respect of the assessee's contention is supportive of such conclusion. However, the learned DRP has given a finding that the figures as given by the assessee needs to be verified. According to the DRP, the assesseee has not maintained separate segmental details and the claim has been based only on internal reports without any certificate from the auditor. In such an event the DRP should have called upon the Assessee to furnish the required details. When in principle adjustment cannot be made in respect of transaction with unrelated parties u/s.92 of the Act, the DRP should have called for the required details, rather 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 wi....