AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2023 (3) TMI 1185
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....ai (DRP) erred in upholding the adjustment of Rs 5,74,45,969/- made by the Dy. Commissioner of Income Tax (TP)-2(2)(2), Mumbai ("TPO") in the arm's length price (ALP) to international transactions entered into by the Appellant with its Associate Enterprises (AEs) and added to the income of the Appellant by the Assessing Officer. In doing so, the Hon'ble DRP erred in upholding the action of the TPO in rejecting the Comparable Uncontrolled Price (CUP) method adopted by the Appellant and adopting Transactional Net Margin Method (TNMM) as the most appropriate method in determination of ALP. 1.2 Without prejudice to 1.1 above, in determination of ALP under TNMM, the Hon'ble DRP erred in confirming the action of the TPO in: a) rejecting the comparable selected by the Appellant viz. Messe Duesseldorf India Pvt Ltd. on the ground of incomplete financial data, even though the said company is comparable. b) adopting Asian Business Exhibition & Conference Ltd. as comparable company and not appreciating the fact that the said company is not strictly comparable due to its size of operations Le, its tumover is Rs.94.19 crores as against Rs.7.47 cro....
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.... 25.01.2017. 7. All the grounds raised by the Appellant in the present appeal pertain to the transfer pricing addition of INR 5,74,45,969/- and are therefore, taken up together hereinafter. 8. The facts, in brief, relevant to the adjudication of the issue raised in the present appeal are that Appellant had adopted Comparable Uncontrolled Price (CUP) Method as the most appropriate method for benchmarking the international transactions with its AEs. During the assessment proceedings, the Appellant was asked by the TPO to substantiate its benchmarking analysis in respect of payment of Offshore Service Charge made to its AE (i.e., Hannover Messe International GmBH) towards exhibitions organized in India. In response, the Appellant submitted service agreement with its AEs and other group companies as material/data to substantiate the ALP determined by the Appellant using CUP Method. The TPO rejected CUP method since the aforesaid service agreements were entered into controlled entities forming the part of the same group and therefore, could not be use a basis for benchmarking international transactions using CUP Method. The TPO adopted Transactional Net Margin Method (TNMM) as the....
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.... transaction under consideration. The Assessing Officer/DRP fell in error in adopting TNMM. Without prejudice to the aforesaid, he submitted that First Comparable should not have been included in the list of comparables as its turnover was 12 to 13 times higher than that of the Appellant. The turnover of the Appellant was only INR 7.47 Crores whereas the turnover of First Comparable was 94.14 Crores. He submitted that First Comparable with very high turnover cannot be considered a good comparable to the Assessee. In this regard relied upon the judgment of the Hon‟ble Karnataka High Court in the case of Acusis Software India (P) Ltd. vs. ITO, Ward 11(1), Bangalore : [2020] 116 Taxmann.com 754 (Bangalore - Trib.)[28.06.2019]. As regards Second Comparable, Ld. Authorised Representative for the Appellant submitted that as it was functionally comparable with the Appellant. The relevant data including the financial results of the Second Comparable were available online and could be extracted from the web portal of Ministry of Corporate Affairs, and therefore, Second Comparable should have been included in the list of comparables. 11. Per contra, the Ld. Departmental Representati....
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....as the relevant material on record. At the outset, we note that turnover of this company in the ITES segment is only Rs.45.33 lakhs which is any case does not satisfy any filter of turnover in comparison to the assessee's turnover more than Rs.27 Crores. Even if we apply the tolerance range of turnover of 10 times on both sides of the assessee's turnover then the company which is having less than Rs. 2.7 Crores of turnover will be outside the said range of 10 times. Accordingly, we are of the view that this company which is having only Rs. 45.33 lakhs turnover cannot be considered as a good comparable to the assessee". 15. From the aforesaid findings of the learned Tribunal, we are satisfied that the reasons assigned by the learned Tribunal in excluding the aforesaid company as comparable is also reasonable and the same deserves to be accepted by us. It is analysed by the learned Tribunal in extenso which arrived at a decision that the company which is having only Rs.45.33 lakhs turnover cannot be considered as comparable to the Assessee-company whose turnover is more than Rs.27 Crores" (Emphasis Supplied) 14. On perusal of the above, it can be seen that the com....
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.... Comparable from the list of comparables. Accordingly, Ground No. 1.2(a) raised by the Appellant is rejected. Ground 1.3 18. We note that the Appellant was also aggrieved by the fact that while computing ALP of the international transaction the TPO had applied PLI at entity level and not with reference to international transaction. We note that while rejecting the objections of the Appellant in this regard the DRP had observed as under: "2.19.1 So far as assessee's objection to non-restriction of the adjustment to the transactions with AES only is concerned, the issue of entity level adjustment versus transaction level adjustment is pending before honourable Supreme Court which has admitted SLP filed by the Department against the decision of honourable Bombay High Court, in the case of CIT v Firestone International Pvt Ltd [ITA No 1354 of 2013] - TS-401-HC- 2015(BOM)-TP. In this case honourable Bombay High Court had held that transfer pricing adjustment should be made with reference to the international transaction and not with reference to the entity level turnover. Since, there is a change in the provisions of the Act and the decisions of DRP are no longer appe....
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.... Assessee and not restricted only to its International Transactions with Associated Enterprise. In support, reliance was placed upon the fact that two appeals filed by the Revenue being Income Tax Appeal No.298 of 2013 (The Commissioner of Income-tax v. Super Diamonds) and Income Tax Appeal No.2068 of 2011 (The Commissioner of Income Tax v. Ankit Diamonds) raising a similar issue have been admitted on 5th May, 2014 and 16th February, 2015 respectively. On the other hand, the Respondent Assessee invites our attention to the decision of this Court in CIT v. Tara Jewels Exports (P.) Ltd. [Income Tax Appeal No. 1814 of 2013, decided on 5th October, 2013] and CIT v. Keihin Panalfa Ltd. in ITA No.11 of 2015 decided on 9th September, 2015, wherein the view taken by the Tribunal in the impugned order has been approved. (d) Chapter X of the Act inter alia deals with computation of income from international transactions having regard to the ALP. Section 92 thereof specifically brings to charge income arising from International Transactions with an Associated Enterprise to tax on computation of income having regard to the ALP of the transactions entered into between the Associated En....