2011 (5) TMI 107 - ITAT MUMBAI

Transfer pricing – adjustment – comparable data – Arm’s length price – TNMM method - main objection raised by the assessee before us is against use of financial information of the comparables at the time of assessment but such information was not available at the time of TP study done by the assessee as well as use of financial data of the comparables for the FY 2005-06 instead of three years taken by the assessee. – Held that: - The information very much existed, though, the assessee might have no access to the said information at the time of TP study but the information, which was very much related to the comparables for the FY 2005-06 which was asked by the TPO and provided by the assessee. Therefore, considering the said information by the TPO while determining the ALP, does not amount to violation of any provisions of law. - if the information gathered by the TPO is relevant material for the purpose of determining the ALP in relation to the international transaction then we do not find any wrong in using the updated data when the correctness and relevance of the same is not objected.

Regarding considering the single year/current year data instead of three years - Held that: - When the assessee has not made out a case that taking the data for only current financial year does not present the correct and fair financial result of the comparables then there is no mistake in considering the data for the financial year in which the international transaction has been entered into.

Regarding turnover filtering as well as difference in functions and risk profile of comparables – the assessee raised these objections only because some of the comparables are having high profit and also high difference in the turnover and not because of the high or low turnover has influenced the operating margin of the comparables. – Held that: - unless and until it is brought on record that the turnover of such comparables has undue influence on the margins, it is not the general rule to exclude the same that too when the comparables are selected by the assessee itself. - when the assessee is having benefit of choice/option as per the said provision as existed at the relevant point of time, no separate adjustment is required on account of risk and functional differences.

Regarding applicability of ± 5% variation from the arithmetic mean of the ALP. – Held that: - the amendment in the second proviso to section 92C(iii) is not retrospective but is prospective from the day from which the amendment is effected i.e. 1-10-2009 - in the arm's length price, to be determined by the Assessing Officer, an adjustment is contemplated in the proviso, is to be made at the option of the assesse.

Regarding levy of interest under section 234B – Held that:- the provisions of section 234B are mandatory and consequential in nature.

Regarding claim of bad debts on account of commission and sundry balances - Held that:- whether the assessee charged the excess commission or less is not relevant and material once the income is subjected to the provisions of Chapter X being related to the international transaction. If the claim of the assessee is allowed, it will defeat the very object and purpose of the provisions of Chapter X (section 92). – Claim of bad debt or business loss would be against the very purpose and object of the provisions of Chapter X of the Act. – Claim of bad debt on account of commission and sundry balances not allowed