AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (7) TMI 2327
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....l/2016 On the facts and circumstances of the case and in law, the learned Deputy Commissioner of Income-tax, Circle-13(1), New Delhi ("AO") has erred in passing the assessment order under Section 143(3) of the Income-tax Act, 1961 ("the Act") after considering the adjustments proposed by the Deputy Commissioner of Income-tax, Transfer Pricing Officer 2(3)(2) ("TPO") in his order passed under Section 92CA(3) of the Act and subsequently confirmed by the Hon'ble Dispute Resolution Panel ("DRP"). That on the facts and circumstances of the case and in law, General Grounds: 1. The learned AO has erred in assessing the income of the Appellant at INR 17,740,270/- as against the returned loss of INR 17,161,261/-. 2. The learned TPO / DRP erred in making an adjustment of INR 29,255,299 in respect of distribution segment under section 92CA(3) of the Act. Transfer Pricing Grounds: Rejection of economic analysis of the Appellant 3. The learned AO / TPO / DRP have erred in making an adjustment under Section 92CA(3) of the Act without returning a finding about existence of any of the circumstances specified in clauses (a) to ....
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.... of the appellant. 13. Without prejudice to above, in the facts and circumstances of case and in law, the learned AO /TPO have erred in excluding the recharge income from operating margin computation without excluding the corresponding cost which is directly identifiable. 14. The learned AO / TPO / DRP have erred in: a. Using single year data instead of multiple year data b. Determining the arm's length margins I prices using data pertaining only to FY 2010-11 which was not available to the Appellant at the time of complying with the Transfer Pricing ("TP") documentation requirements. 15. Without prejudice to above, in the facts and circumstances of case and in law, the learned AO /TPO / DRP have erred in not using Resale Price Method as the most appropriate method for computation of arm's length price for the impugned transaction. Rejection/Selection of comparable companies 16. The learned AO / TPO/ DRP have erred by rejecting a comparable company (i.e. Ashco Niulab Industries Limited) identified by the appellant for having different accounting year. 17. The learned AO / TPO/ DRP have erred in taking an incons....
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....ered independent of each other and without prejudice to each other. The Appellant craves leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal. The Appellant prays for appropriate relief based on the said grounds of appeal and the facts and circumstances of the case. ITA No. 1478/Del/2016 "1.That the directions of the Hon'ble DRP are erroneous and contrary to facts and law. 2. That whether the Hon'ble DRP has erred in law and in facts and circumstances of the case in directing the TPO to give working capital adjustment in the case of assessee. The Appellant craves leave to add, alter or amend any grounds of appeal raised above r at the time of hearing." Assessment year 2012-13 ITA No. 231/Del/2017 On the facts and circumstances of the case and in law, the learned Assistant Commissioner of Income-tax, Circle-26(1), New Delhi ("AO") has erred in passing the assessment order under Section 143(3) of the Income-tax Act, 1961 ("the Act") after considering the adjustments proposed by the Deputy Commissioner of Income-tax....
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....by using incorrect allocation ratio. 9. Without prejudice to above, in the facts and circumstances of case and in law, the learned AO /TPO / DRP have erred in not giving set off of excess profits earned in commission segment. 10. The learned AO /TPO / DRP have erred in not restricting the adjustment proportionate to the value of international transactions. Computation of operating margin 11. Without prejudice to above, in the facts and circumstances of case and in law, the learned AO /TPO / DRP have erred in computing operating margin of the Appellant by excluding certain other operating income and including certain extra-ordinary expenses while computing the operating margin of the Appellant. 12. Without prejudice to above, in the facts and circumstances of case and in law, the learned AO /TPO have erred in computing working capital adjusted operating margin of the comparable companies. 13. The learned AO / TPO / DRP have erred in: a. Using single year data instead of multiple year data b. Determining the arm's length margins I prices using data pertaining only to FY 2011-12 which was not available to the Appe....
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....ised to a loss of Rs.1,71,61, 261/-. As there was international transaction entered into by assessee, a reference was made to the Ld.TPO for computing arm's length price of international transactions. 2.2. During assessment proceedings, Ld.TPO observed that assessee undertook following transactions, with its Associate Enterprise (A.E.) during relevant financial year: S.No. Head Value - Rs. 1. Purchase of traded goods/spares 13,55,93,316/- 2. Purchase of demonstration equipment 1,19,93,269 3. Receipt of commission income 3,79,24,796 4. Cost recharges 21,22,327 5. Provision of MSS 2,46,92,478 Total: 19,96,02,836 Assessee used TNMM as most appropriate method, with PLI as OP/sales. The assessee computed its margin at 2% as against 3.95% of five comparables, selected by using multiple year data. Based on this, assessee submitted that the international transaction entered into with its AE was at arm's length price. Ld.TPO observed that assessee had aggregated transaction of sale and purchase and service income and commission income. Ld.TPO rejected the aggregation of transactions of trading with AE and that of co....
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....the submissions advanced by both the sides in the light of records placed before us. We have also perused order passed by Co-Ordinate Bench of this Tribunal for immediately preceding Assessment Year (A.Y.) in assessee's own case (supra). 9.1. From the facts of present case, it is observed that Ld. TPO discarded the economic analysis of assessee, by segregating two activities. It is observed that for A.Y. 2009-10, DRP as well as Coordinate Bench of this Tribunal (supra) upheld determination of arm's length price of international transaction by treating TNMM as most appropriate method to benchmark the international transactions at entity level. It is also observed that for the year under consideration the same international transactions are benchmarked and the business model of the assessee is identical without there being any change in the FAR analysis. 9.2. The relevant observation of this Tribunal in the immediately preceding A.Y. in assessee's own case for assessment yea 2009- 10(supra) are as under: "15. We have carefully gone through the record in the light of the submissions on either side. Though the learned DR submitted that issues relating to the Asstt. Years....
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....ds. 18. As a matter of fact, Id. DRP incorporated all these details in their order and having considered the entire gamut of contentions of the assessee, he held that the past history of the assessee shows that the Ld. DRP in AY 2009- 10 upheld the view of the AO of determining the arm's length price of the international transaction by treating the TNMM as the most appropriate method to benchmark the international transactions. It further held that in the year under consideration, the same international transactions are benchmark and the business model of the assessee is identical and there is no change in the FAR analysis for the year under consideration as well as in the preceding year. Ld DRP further observed that the Ld. AO/TPO had not given any compelling reasons as to why in the year under consideration, the TNMM has been rejected and CUP has been applied to benchmark the commission income separately. Having observed so, Id. DRP concluded that the method adopted by the Id. TPO was not acceptable and directed the TPO to apply the TNMM and work out the arm's length price of the international transactions in consonance with the decision of the DRP taken in the p....
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....de. Perhaps keeping all this in view, ld. DRP found that in the backdrop of similarity of the international transactions to be bench marked and the business model of the assessee over the past few years, in the absence of any compelling reasons, the consistently applied TNMM should not have been rejected and CUP method should not have been applied to bench mark the commission income separately. We do not find any reason to disagree with the ld. DRP in view of the fact that the view taken by the ld. DRP is also one of the plausible views amongst the several options put forth before them by the assessee which are reflected in the order of the ld. DRP. We, therefore, uphold the finding of the ld. DRP and find ground No.1 devoid of merits. 9.3. Since there is no factual and functional difference in the activities of assessee for the year under consideration as compared to the Previous Year, respectfully following the above observation of Co-Ordinate Bench in assessee's own case for A.Y.2009-10, we direct Ld.TPO to benchmark international transactions by using TNMM as most appropriate method at entity level. 10. Accordingly these grounds raised by assessee stands allowed. 11. C....
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....overnment. 13.2. Assessee is directed to provide all the bills/invoices raised by the landlord in respect of both the premises and A.O. is directed to verify actual payment made and to allow as per law. 14. Accordingly this ground raised by assessee stands allowed for statistical purposes. 15. Ground No. 21 is in respect of the disallowance of service tax amounting to Rs.51,72,191/- considering it as prior period expenses. 16. Ld.AR at the outset brought to our notice order dated 27/09/10 passed by Asst Commissioner Service Tax Division-2, New Delhi in assessee's case. The issue that was considered by the ACST-II was in respect of rebate claim of Rs.51,72,191/- filed by assessee. By relying upon order passed by Service Tax Department, Ld.AR submitted that these were subject matter of verification before Service Tax Department. It was submitted that these expenses were booked by assessee for current year, do not arise from any omission or errors, but due to crystallisation of expenses based on unfavourable orders from Service Tax Department. 17. On the contrary Ld. DR placed reliance upon the orders of the A.O. 18. We have perused the submissions advanced by both t....
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..... Accordingly these grounds are not adjudicated. 32. In the result appeal filed by assessee stands allowed as indicated above. 33. ITA No.1478/Del/2016 The only issue raised by revenue is in respect of working capital adjustment that has been granted by Ld. DCIT at the direction of DRP. It has been submitted that this issue has been dealt with by Coordinate Bench of this Tribunal in assessee's own case for assessment year 2010-11 (supra) as under: 22. Now coming to the 2nd ground in revenue's appeal, it relates to the direction given by Ld. DRP to the Ld. AO/LD. TPO to give working capital adjustment while working out the average margins of the parables. It could be seen from the impugned order, Ld. DRP opined that in view of rule 10 B (3), to improve the compatibility in the facts of the case by comparing margins of the 11 tested party with the incomparable, adjustment should be made for the working capital for which the reliable data has to be provided by the taxpayer. While directing the taxpayer to provide the necessary Data/details with computation of the working capital of the tested party and comparables, Ld. DRP directed the Ld. TPO to give the working ....
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.... transfer pricing adjustments. 44. Both sides submitted that all the issues contested in these grounds are similar and identical to Ground Nos. 3-17 raised in Assessment Year 2011-12. 45. In the foregoing paragraphs we have already decided these issues in favour of assessee by placing reliance upon the order of Coordinate Bench of this Tribunal in assessee's own case for assessment year 2009-10 (supra). The relevant observation of this Tribunal for assessment year 2009-10 (supra) are as under: "15. We have carefully gone through the record in the light of the submissions on either side. Though the learned DR submitted that issues relating to the Asstt. Years 2007-08 to 2009-10 are different in so far as transfer pricing adjustment is concerned, no document is placed on record to controvert the findings of the Ld. DRP vide paragraph no.7.2 of their order. However, Order u/s 92CA(3) of the Income-tax Act for AY 2007-08, order u/s 92CA{3) of the Act for AY 2008-09 and order u/s 92CA(3) of the Act for AY 2009-10 in assessee's own case clearly establish that the same international transactions are bench marked and the business model of the assessee is identical and th....
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....l transactions are benchmark and the business model of the assessee is identical and there is no change in the FAR analysis for the year under consideration as well as in the preceding year. Ld DRP further observed that the Ld. AO/TPO had not given any compelling reasons as to why in the year under consideration, the TNMM has been rejected and CUP has been applied to benchmark the commission income separately. Having observed so, Id. DRP concluded that the method adopted by the Id. TPO was not acceptable and directed the TPO to apply the TNMM and work out the arm's length price of the international transactions in consonance with the decision of the DRP taken in the preceding Asstt. Year 2009-10. 19. As has been observed by us in the preceding paragraphs, no compelling reasons are forthcoming even before us as to why the Ld. TPO should discard the method of TNMM which has been consistently and continuously adopted in the last three preceding years. From the order of the Id. TPO for the Asstt. Year 2008-09, we find that there is commission income during that year also. Ld. TPO observed that rule of consistency cannot be applied forever when facts were not considered and....