2024 (3) TMI 1304

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.... 2. That having regard to the facts and circumstances of the case, the Ld.CIT(A) has erred in holding that the reference made to the transfer pricing officer u/s 92CA(3) by Ld.A.O. is in conformity with law and facts of the case. 3. That having regard to the facts and circumstances of the case, Ld.CIT(A) has erred in upholding the action of the Ld. TPO in rejecting the appellant's TP analysis and applying TNMM at the enterprise level by rejecting the segmental accounts of the appellant and holding them to be not trustworthy. 4. That having regard to the facts and circumstances of the case, Ld.CIT(A) has erred in holding that the same set of comparables as used by the appellant for its AMC segment should be used for determining the ALP of the international transactions based on entity level financials of the appellant. 5. That having regard to facts & circumstances of the case, Ld. CIT(A) has erred in law and on facts in passing the impugned order contrary to law and facts and without providing adequate opportunity of hearing and without considering the principles of natural justice. 6. That the appellant craves the leave to add, modify, am....

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....onfirmed order', 'Payment for Automation charges' and ' Payment for training charges', assessee has used TNMM and PLI of OP/OC. The results of the tested party were calculated at 35.06% as against results of comparables using three years data at 22.48%. For the international transaction relating to 'Purchase for normal sales', assessee has used Resale Price Method (RP ) with PLI of gross margin/selling price. The tested party margin of the assessee has been calculated at 22.18% as against 8.02% of the comparables. 7. Before us, the ld. counsel for the assessee vehemently stated that the TPO/CIT(A)/Assessing Officer has misunderstood the facts in true perspective while doing FAR analysis of the assessee. 8. The quarrel revolves around the following observations of the TPO confirmed by the ld. CIT(A): "5.2 The FAR analysis of the assessee revealed that the 'Provision of AMC services' was inextricably linked to other functions being performed by the assessee, i.e, Purchase of equipment, Provision of marketing and administrative support services, Provision of agency services, purchase of spare parts and equipments and other related activit....

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....hat the TPO has grossly erred in analyzing the assets utilized and risks assumed by the assessee while considering the FAR analysis of the assessee. 10. We have given thoughtful consideration to the TP study report of the assessee, purchase of spare parts for normal business, AMC. We find that Research and Development are undertaken by the AE of the assessee. All the equipments and spare parts supplied to the assessee by its AE are manufactured by its group companies. The assessee is responsible for all functions relating to inventory management and the assessee enters into a contract with the customers for providing AMC services and accordingly, it is responsible for delivery of services to the customer. 11. Regarding sale of spare parts and equipments, the assessee is responsible for making sale of spare parts and equipment imported by it from its AE. Sale of spare parts under AMC business can be broadly categorized into three types: (i) Over the counter sale wherein the customer has not taken any AMC and he purchases only spare parts or equipment from the assessee. (ii) Sale to AMC customer wherein the customer has taken AMC from the assessee. (i....

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.... defect/error/fallacy in them. Observations of the ld. CIT(A) that non compete fee and good will has not been allocated is not accepted as the TPO himself has not allocated these expenses. 18. As mentioned elsewhere, the assessee has not only provided segmental account but has also allocated expenses and has given basis of allocation. Considering the facts of the case in totality, we do not find any merit in the stand taken by the TPO/Assessing Officer as confirmed by the ld. CIT(A). We, accordingly, direct the Assessing Officer to delete the impugned adjustment. 19. In the result, the appeal of the assessee in ITA No. 1818/DEL/2013 is allowed. The order is pronounced in the open court on 07.03.2024. ============= Document 1 Annexure 1: Detailed Segmental Analysis of Spectris India Particulars Agency & AMC Business Marketing Comman Abnormal Total Support Services Income from Operations Sales 18,367,552 20,640,782 Commission 23,781,560 AMC Sales 2,924,663 AMC Service Income 12,414,503 Installation Services 3,938,190 Services Income (BU) 853,415 17,086,869 In Rs 39,008,334 23,781,560 2,924,....

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....rofit 15,254 6,914,696 4,609,797 52,297,648 51,603,552 11,524,494 13,519,992 117,42 (13,799,325) 10,420,217 (11,881,839) (15,26 Document 3 Annexure 6: Basis of allocation/ apportionment of revenue and expenditure in two segments Income from Operations Sales Commission AMC Sales Actu Actual Actu Actual AMC Service income Actual Instalation Services Actual Services Income (BU) Actual Actua Other Income Interest Received Provision WIB Proft on sale of FA Actual Actual Actual Sum Sum Sum Gain on Forx Total Revenue Expenses Cost of Good Sold Actual Actual ative, Personnel & Selling Exp Salary cost of agency and Salaries, Wages and Bunus Salary cost of AMC team makreting support team Contribution to provident and Salary cost of administration and finance and other common team other funds Staff welfare Insurance Travelling & Conveyance Legal & Professional Seminar &Traing Printing & stationery Communication Rates & Taxes Provision of Doubtful debts Provision for inventory obsolescence Allocation of expendit....