TaxTMI 
TaxTMI 
2024 (1) TMI 412
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....tances of the case and in law, the learned Asst. Commissioner of Income Tax, Circle - 1, Thane ('the AO')/Jt. Commissioner of Income Tax, Transfer Pricing Officer - 3(1), Mumbai ('the TPO') erred in making an adjustment to the arm's length price of the international transaction of export of finished goods (Manufacturing segment) by applying Comparable Uncontrolled Price ('CUP') Method instead of Transactional Net Margin Method (TNMM1) and thereby erred in computing transfer pricing adjustment of Rs. 3,08,95,543/-. It is prayed that the learned AO/TPO be directed to consider the international transaction of the Assessee as arm's length and accordingly the transfer pricing adjustment of Rs. 3,08,95,543/- should be deleted. 2. On the facts and circumstances of the case and in law, the learned AO/TPO erred in considering two methods (TNMM and CUP Method) for calculating Arms' Length Price of international transactions and making adjustment based on the method on which Transfer Pricing adjustment to the Assessee was higher, thereby disregarding the fact that the law specifically requires selection of the Most Appropriate Method. It is prayed tha....
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....h Price (ALP) of those transactions to the Transfer pricing Officer (TPO). The TPO proposed following transfer pricing adjustments:- In Manufacturing Segment - 3,08,95,543 In Fees for ITES - 2,82,25,867 ....
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....e prayed that the AO/TPO may be directed to determine ALP by adopting TNM method as followed by the assessee. 5. We heard Ld D.R and perused the record. We notice that the co- ordinate bench has held in the assessee's own case in AY 2010-11 (referred supra) that CUP method cannot be adopted as most appropriate method in the case of the assessee owing to differences on account of volume, geography, functions performed and risks assumed, while transacting with AEs and non-AEs in case such differences cannot be eliminated or adjusted. In this regard, the Tribunal has followed following decisions rendered by other co-ordinate benches:- (a) Firmenich Aromatics Production (India) P Ltd vs. ITO (ITA No.7145/Mum/2017) (b) Amphenol Interconnect India P Ltd vs. ACIT, Pune (2019)(105 taxmann.com 382)(Pune). In view of the above, consistent with the view taken in the earlier year, we set aside the transfer pricing adjustment made in the manufacturing segment and direct the TPO/AO to re-compute ALP of that segment under TNM method. 6. In Ground no.3, the assessee is objecting in not excluding certain expenses treating them as non-operational in nature. The Ld A.R submitted that this grou....
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....inancial Solutions P Ltd (ITA No.2669/PUN/2016 dated 21-01-2019), which in turn had relied upon the decision rendered in the case of Emerson Climate Technologies (India) P Ltd. In all these cases, fluctuating margin of this comparable company has been considered as negative point and accordingly, this company was excluded. The observations made by the Tribunal in the case of Emerson Climate Technologies (India) P Ltd are extracted below:- "18. We have heard rival contentions and perused the record. The limited issue which arises is against benchmarking of ALP of the IT(TP)A No. 2299/Mum/2017 international transactions on account of provisions of Oracle Support Services (JT-enables services) by assessee to its associated enterprise and for benchmarking of ALP of the international transactions to the said concern ie. Excel Infoways Ltd. which has been finally selected by the DRP, is to be excluded since it is showing fluctuating margins. It is further observed that the operating margin of the company had shown drastic fluctuations ranging from 247.74% in F.Y. 2008-09 to 2% in FY 2014-15. The assessee has pointed out the margins shown by the said concern were as under: Financial Y....
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....lowed." Since the Tribunal has held M/s Excel Infoways Ltd as not a good comparable company in many of its decisions, following the same, we direct exclusion of this company from the list of comparable companies. 11. The assessee seeks exclusion of M/s M/s Hartron Communications Ltd. We notice that this company has also been excluded by Bangalore bench of Tribunal in the case of M/s ISG Novasoft Technologies Ltd (IT(TP)A No.42/Bang/2018 dated 29-04-2019 relating to AY 2013-14). We notice that the Bangalore bench has referred to the decision rendered by Chennai bench of Tribunal in the case of M/s Cameron Manufacturing India P Ltd vs. DCIT in ITA no.336/Chny/2018 dated 16/10/2018, wherein it was held that M/s Hatron Communications Ltd was not a good comparable with the following observations:- "7. Ground No.2.3: M/s. Hartron Communications as the comparable company:- The Ld.AR submitted before us that M/s. Hartron Communications had diversified operations amongst which many relates to activities that are not similar to the activity of the assessee company. Further it was submitted that the company M/s. Hartron Communication's profit from BPO business both export and domest....