AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2021 (11) TMI 1178
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....of M/s. Gansons Ltd. (iii) Granting of leverage of 5%. (b) Trading segment. (i) Adopting of PLI as OP/OC instead of OP/OR. (ii) Incorrect computation of margin in the case of M/s. Telecommunication Consultants India Ltd. (c) Global sales and marketing activity fee/Management fee Not appreciating that TNMM adopted at entity level would subsume payment of global sales and marketing activity fee and Management. Hence no separate TP adjustment is required. (d) Disallowance made u/s 14A of the Act. (e) Short credit of TDS. (f) Deduction of education cess and secondary & higher education cess. (g) Dividend distribution tax rate should be confined to the rate as per DTAA. Hence we confine ourselves to the above said issues. Accordingly all other grounds are dismissed as Not Pressed. 3. The business of the assessee consists of manufacturing, trading, installation and servicing of process control systems, industrial automation instruments/equipments and electrical measuring equipments. The activities carried on by the assessee has been categorized into three segments namely systems, trading of products and engineering services. The TPO proposed following transfer pricing....
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....es was also considered as non-operating in nature in AY 2015-16 in their hands, since it is quite possible that the comparable companies would also be debiting the profit and loss account with such kind of provisions as mandated by the Accounting standards. There should not be any dispute that identical treatment for an item of expenditure should be given both in the hands of the assessee as well as in the hands of the comparable companies. Accordingly, this claim of the assessee requires examination. In any case, this claim has been raised first time before us, meaning thereby, there was no occasion for the authorities below to examine this claim of the assessee in the year under consideration. Accordingly, we restore this claim of the assessee to the file of AO/TPO for examining it in accordance with law. 9. The next issue urged in the manufacturing segment is regarding consideration of leverage of 5%. The AO/TPO shall examine this claim of the assessee in accordance with law. 10. The third issue urged in manufacturing segment relates to computation of margin in the case of comparable company named M/s. Gansons Ltd. It is the contention of Ld. A.R. that the TPO has computed mar....
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....ing in the provision of services to an associated enterprise, one should not weight the net profit indicator against the revenue from the sale of series because these are the controlled sales for which consistency with the arm's length principle is being tested. Where the denominator is materially affected by controlled transaction costs that are not the object of the testing (such as head office charges, rental fees or royalties paid to an associated enterprise, caution should be exercised to ensure that said controlled transaction costs do not materially distort the analysis and in particular that they are in accordance with the arm's length principle. 2.89 The denominator should be one that is capable of being measured in a reliable and consistent manner at the level of the tax-payer's controlled transactions. In addition, the appropriate base should be one that is capable of being measured in a reliable and consistent manner at the level of the comparable uncontrolled transactions. This is practice limits the ability to use certain indicators, as discussed at paragraph 2.99 below. Further, the taxpayer's ITA No. 914/Hyd/2013 M/s. St. Jude Medical India Private Limited, Hyder....
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.... contested in the trading segment is that the TPO has computed margin of comparable company named M/s. Telecommunication Consultant India Ltd. incorrectly. Since the claim of the assessee requires verification, we restore this issue to the file of AO/TPO. 14. We shall now take up the issue relating to TP adjustment made in respect of payments of Global Sales & Marketing activity fee and Management fee. The assessee did not benchmark these payments made to its AE separately, since it adopted TNM method at entity level. However, the TPO bench marked the same separately and accordingly proposed TP adjustment of Rs.2.16 crores in respect of payment of Global Sales and Marketing activity fee and Rs.26.52 lakhs in respect of payment of management fee. The Ld DRP also upheld the above said adjustments. 15. The Ld A.R submitted that identical TP adjustments were made in AY 2010-11 and the Tribunal, vide its order dated 09-06- 2017 passed in IT(TP)A No,342/Bang/2015 and IT(TP)A No.464/Bang/2015, has cancelled the same holding that these expenses form part of operating cost. It was further held that these payments have to be allocated in the ratio of turnover of the other international tra....
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....o of turnover of the other international transactions and then the ALP of the other international transactions has to be determined under TNMM analysis. Hence we set aside the entire issue of determination of ALP and TP Adjustment to the record of the TPO/A.O. for carrying out fresh exercise of determination of ALP in respect of international transactions by considering the payment in respect of management fees and Global Sale and Marketing Activity Fees as part of the operating cost and allocating the same in the ratio of the turnover of the other international transactions. Following the decision rendered in the assessee's own case in AY 2010-11, we restore these two issues to the file of AO/TPO with similar directions. 17. The next issue urged by the assessee relates to disallowance made u/s 14A of the Act. The assessee had received exempted dividend income of Rs.24,86,000/- and has disallowed a sum of Rs.48,573/- u/s 14A of the Act. The A.O. noticed that the assessee did not have opening or closing balance of investments as on the balance sheet dates. However, during the course of the year, the assessee has invested in dividend yielding securities. The peak of investments ma....