TaxTMI 
TaxTMI 
2019 (3) TMI 2080
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.... margins and that no further transfer pricing adjustment would be warranted. The ld DR before us fairly agreed for adjudication of Ground Nos. 7 & 8 first. For the sake of convenience, the Ground Nos. 7 & 8 raised by the assessee are reproduced below:- 7. On the facts and in the circumstances of the case and in law, the learned TPO / AO erred and the Hon'ble DRP further erred in making th entire transfer pricing adjustment of INR 25,22,63,069 at entity level. In other words, the learned TPO should have restricted the adjustment only in respect of international transactions with the AE entered into by the Appellant. 8. On the facts and in the circumstances of the case and in law, the Hon'ble DRP erred in disregarding the binding precedent laid down by the Hon'ble Bombay High Court without assigning any reasons for the same. 3. The brief facts of this issue are that Damco is one of the world's leading third party logistics providers which is engaged in the business of providing logistics solutions, encompassing supply chain management, freight forwarding, warehousing and distribution services to global customers of Maersk Group. Freight forwarding services ensure....
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.... No. Nature of International Transaction Value of transaction (Rs.) A.Y. 2012-13 Value of Transaction (Rs.) A.Y. 2011-12 1. Receipt of freight and other charges 52,08,78,792 51,96,97,176 2. Payment of freight, terminal handling and other charges 347,35,18,458 244,22,24,375 3. Payment of support service charges 27,89,59,233 14,63,17,217 4. Payment for miscellaneous services 79,95,179 98,85,452 5. Recovery of expenses 29,66,791 66,50,431 3.3. The ld TPO observed that for the purpose of benchmarking, the assessee had selected itself as tested party. The assessee submitted that the above international transactions are inextricably linked and are wholly necessary for logistics business and accordingly had aggregated the same and carried out a common benchmarking analysis under Transactional Net Margin Method (in short TNMM). The ld TPO accepted the TNMM as the Most Appropriate Method (MAM in short) but adopted the Profit Level Indicator (in short PLI) of the assessee at Net Profit Margin by rejecting the PLI adopted by the assessee as Operating Profit (OP) / Value Added Expenses (VAE) . The ld TPO finally by a....
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....ost of the Assessee D 701,42,71,698 Adjustment as per the TPO E=D-C 25,22,63,069 Proportionate adjustment on AE cost only (The Assessee's contention) Total transactions with AEs (expenses) F 376,04,72,870 Actual Total cost, including AE and Won AE Costs D 701.42,71,698 Proportion of AEs cost to Total cost G=F/D 53.61% Proportionate Adjustment H=G*E 13,52,42,612 +/- 5 percent computation Total transactions with AEs (expenses) F 376,04,72,870 5% of the International Transactions 1 =F*S% 18,80,23,644 Since adjustment of INR 13,52,42,612 is within the 5 percent variation range, proposed Transfer Pricing adjustment ought to be deleted. Based on the above workings, the assessee submitted that no adjustment should have been made as the difference between the ALP so determined and price at which the international transaction has actually been undertaken is below 5% of the value of international transactions. 3.6. The ld DRP among other observations categorically observed in page 15 of its order in para 3.2.11 as under:- "3.2.11 So far as assessee's contention that adjustment may be re....
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....g arms length principle is that uncontrolled transactions are at arm's length, and therefore, if the overall margins are less than arm's length margins, the short fall must be on account of AE transactions only and not on pro rata basis. (b) Whether, on the facts and in the circumstances of the case and in law, the Tribunal is justified in deleting the addition of Rs 8,39,245/- as the adjustment is with +/- 5% as the ITAT has restricted the adjustment only on AE transactions which has resulted the adjustment within +/- 5% ? (c ) Whether, on the facts and in the circumstances of the case and in law, the Tribunal is justified in restoring the issue of disallowance u/s 14A back to the file of the AO for fresh consideration in view of the decision of this Court in the case of Godrej & Boyce Manufacturing Co. Ltd (328 ITR 81) against which an SLP has been filed in the Apex Court ?" 3.8.1. The ld AR also placed on record that the SLP(C ) No. 000140/2016 registered on 5.1.2016 before the Hon'ble Supreme Court for which Leave was granted and tagged on with Civil Appeal No. 7019 of 2011 vide proceedings dated 16.8.2016 was finally dismissed by the Hon'ble Apex Court in ....
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....riving at the ALP using the Net Transactional Margin Method (TNMM) ; whereas Rule 10B(1)(e) mandates the consideration of profit margins with unrelated enterprises? " It was observed in the said order by the Hon'ble High Court as under:- "6. The question as proposed by the revenue does not seems to arise from the impugned order of the Tribunal nor is the method of determination of ALP on application of TNMM arriving at the margin of 4.79% is disputed before Tribunal or before us. We are unable to understand the grievance of the revenue as formulated in the proposed question. The respondent-assessee has not challenged the application of TNMM and arriving at the margin of 4.79% arrived at by the TPO to determine ALP. The grievance of the respondent-assessee before the Tribunal is only with the margin of 4.79% being applied in respect of all it's sales and not restricted to the international transactions entered into by the respondent-assessee with it's AEs. It is evident from the provisions of Chapter-X of the Act that the adjustment which has to be done to arrive at ALP is only in respect of the transaction with it's AEs. Thus no fault can be found with the order o....