2014 (3) TMI 967 - AT - Income Tax

Determination of arm's length price - Held that - difference in arm's length margin is 3.98% and the Tribunal in its order for assessment year 2008-09 in assessee's own case has held that the functional profile of M/s Gemini Communications Ltd. has not been properly dealt with by lower authorities and gave a direction to the TPO to reconsider the same and passed appropriate order. It was also brought to our notice that till date no such effect has been given to the order of the Tribunal. From the record, we also find that assessee had furnished a chart before the DRP which disclosed that the total turnover from AE's was ₹ 119.78 crores and it constituted only 39.13% of the total revenue. Thus, if at all any adjustment is made to the income of the assessee it should be restricted to the international transactions of the assessee. - ₹ 17,90,408/- was claimed by the assessee as TDS in the revised return filed for assessment year 2009-10, however, the same was not given credit by the AO. After adjusting ₹ 17,90,408/-, the balance works out to be ₹ 14,98,605/-(32,89,013-17,90,408). After going through the entire material placed before us and considering the financial position of the company vis- -vis balance of convenience and without going much into merits of the addition, we grant stay for six months - Stay granted.

Summary

Issues:
Stay Application in respect of order passed by the AO under Section 143(3) read with Section 144C(5) for the A.Y.2009-10.

Analysis:

1. The appellant contended that the appeal for A.Y. 2009-10 is similar to the order in the appellant's own case for A.Y. 2008-09. The Tribunal directed the AO/TPO to restrict the adjustment of ALP to the international transactions only.

2. The Tribunal set aside the issue of functional comparability of a specific company vis-`a-vis the assessee for proper examination and clarified that if only a segment of the business is comparable, segmental results may be considered for ALP determination.

3. The appellant argued for the benefit of a tolerance margin of 5% under Section 92C(2), as directed by a previous decision in the appellant's own case, which was not properly appreciated by the authorities.

4. The issue of adjustment for the difference in working capital employed was remitted to the TPO for proper examination as it was not adequately addressed by the lower authorities.

5. The Tribunal observed that the functional profile of another company was not properly assessed and directed the TPO to reconsider and pass an appropriate order, affecting the computation of the revised arithmetic mean of comparables.

6. The Tribunal considered the differential in arm's length margin and the impact on the adjustment required, leading to a detailed calculation for potential refund or additional tax liability for the appellant.

7. After considering the arguments and the previous order for A.Y. 2008-09, the Tribunal granted a partial stay for six months, subject to specific conditions including a payment by the appellant and an expedited appeal hearing date.

8. The Tribunal emphasized that any adjournment petition by the appellant would result in the vacation of the stay granted. The decision was concluded by allowing the stay application partly as indicated in the order.