TaxTMI 
TaxTMI 
2026 (9) TMI 999
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....ld. AO/ Transfer Pricing Officer of Rs.1,13,83,297/- on account of Arm's Length adjustment of the international transactions entered into with the foreign Associated Enterprises. 3. The Facts in brief are that the assessee filed its return of income on 28.11.2016, declaring total income of Rs. 10,55,26,530/-. The case of the assessee was selected for scrutiny under Computer Assisted Scrutiny Selection (CASS) for the reason of the TP Risk Parameters as the assessee entered into international transactions with its AEs. The case of the assessee was referred to Transfer Pricing Officer for determination of Arm's Length Price of international transactions. The Transfer Pricing Officer according Notice u/s 143(2) and 142(1) of the Act along wi....
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....Operating Revenue of the assessee 28933.18 Shortfall in revenue 310.51 Total Value of AE transaction 10606.44 Percentage of transaction to Operating Revenue 36.66% Adjustment to be made downwards (36.66% of 310.51) 113.83 4. Accordingly, the ld. AO made addition in respect of Arm's Length Price adjustment of Rs.1,13,83,297/- suggested by the TPO. 5. In the appellate proceedings, the ld. CIT (A) confirmed the order passed by the ld. AO/Transfer Pricing Officer on this issue by observing and holding as under:- "I have duly examined the material at hand including the impugned order, the submissions of the appellant, the citations and orders relied upon by the appellant as well as the citations that are....
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....f operating cost unless exceptional circumstances are proved. The appellant has submitted for selective adjustment by removing depreciation from its own cost and re-working comparable without proper evidences. Such computation is not acceptable, Hence the action of the TPO is upheld and these grounds of appeal are dismissed." 6. After hearing the rival contentions and perusing the materials available on record, we note from the record/documents placed before us that assessee has entered into international transactions with its foreign AE's and followed TNMM method to benchmark its transactions with the AEs. We also note that so far as the comparable are concerned, there is no dispute but the only dispute is with regard to the methodo....
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....on as part of the expenses is 3.36% whereas without considering the deprecation as part of the operating expenses it is 5.94%. Therefore, the ld. Transfer Pricing Officer has committed an error in considering the depreciation as part of the operating cost in the case of the assessee and at the same time not considering the depreciation as part of operating cost in the case of comparable thereby making anomalous and fallacious comparison. If we calculate the Arm's Length Price of the transactions without considering the depreciation as part of the operating cost, the same works different as under: Particulars Without depreciation as part of OC Operation cost where 5.94% is profit margin 27211.48 Arm's Length profit Margin 4....