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2022 (11) TMI 529 - AT - Income TaxTP adjustment - denominator of the profit level indicator (PLI) - TPO has taken operating profit / total cost (OP/TC) as the PLI whereas in the case of the assessee in preceding years, operating profit / (value added expenses)VAE - HELD THAT - DRP following the findings of its predecessors upheld the OP/ OC as the appropriate profit level indicator (PLI), but the Tribunal for A.Y. 2010- 11 2019 (12) TMI 1258 - ITAT MUMBAI has upheld OP/VAE is the Profit Level Indicator for comparison under TNMM. Respectfully following the finding of the Tribunal (supra), we direct the Ld.AO / TPO to adopt OP/VAE as the profit level indicator for comparison with the comparable cases. The ground of appeal of the assessee is accordingly allowed for statistical purpose. Claim of TDS short granted - HELD THAT - As assessee before us admitted that credit in respect of certain TDS has been received subsequent to the order passed by the Assessing Officer. In our opinion, the issue is merely a verification of the eligibility of the TDS credit of the assessee by the Assessing Officer and, therefore, same is restored back to the file of the Ld.Assessing Officer for allowing the TDS credit as per rules applicable. The ground of the appeal of the assessee is accordingly allowed for statistical purpose.
Issues Involved:
1. Arm's Length Principle and Transfer Pricing Adjustment. 2. Denominator of Profit Level Indicator (PLI). 3. Exclusion of Pass Through Costs. 4. Inclusion of Comparable Companies. 5. Charge of Interest under Section 234B. 6. TDS Credit Short Granted. 7. Penalty Proceedings under Sections 271AA and 270A. Detailed Analysis: 1. Arm's Length Principle and Transfer Pricing Adjustment: The primary issue revolves around the addition of INR 16,83,26,426 to the income of the appellant by the Dispute Resolution Panel (DRP), confirming that the international transactions related to the freight forwarding segment did not meet the arm's length principle under the Income Tax Act, 1961. The appellant argued that the Transfer Pricing Officer (TPO) disregarded the arm's length price (ALP) and the scientific benchmarking process documented by the appellant. 2. Denominator of Profit Level Indicator (PLI): The appellant contested the use of "Operating Profit/Total Cost" (OP/TC) as the PLI by the TPO, advocating instead for "Operating Profit/Value Added Expenses" (OP/VAE), which was used in previous years. The Tribunal upheld the appellant's position, directing the TPO to adopt OP/VAE as the PLI for comparison, citing consistency with prior years and the specific nature of the appellant's business model. 3. Exclusion of Pass Through Costs: The appellant argued for the exclusion of pass-through costs from the cost base for computing the operating margin (OP/TC). However, this ground was not specifically argued and was dismissed as not pressed. 4. Inclusion of Comparable Companies: The appellant challenged the inclusion of Om Logistics Limited as a comparable company, arguing it was functionally incomparable due to its significant asset base, including over 5000 trucks. The Tribunal directed the exclusion of Om Logistics Limited from the set of comparables, following precedents from previous assessment years where similar exclusions were made. 5. Charge of Interest under Section 234B: The appellant contested the charge of interest under Section 234B of the Act. The Tribunal noted that this issue was consequential in nature and dismissed it as infructuous. 6. TDS Credit Short Granted: The appellant claimed a shortfall in the TDS credit granted by the Assessing Officer, amounting to INR 1,76,71,200. The Tribunal restored the matter to the Assessing Officer for verification of the TDS credit as per Form 26AS and applicable rules, allowing the ground for statistical purposes. 7. Penalty Proceedings under Sections 271AA and 270A: The appellant sought the dropping of penalty proceedings initiated under Sections 271AA and 270A. The Tribunal deemed the issue premature at this stage and dismissed it as infructuous. Conclusion: The appeal was partly allowed for statistical purposes, with specific directions for the TPO to adopt OP/VAE as the PLI and exclude Om Logistics Limited from the set of comparables. The issue of TDS credit was remanded for verification, while other grounds were dismissed as infructuous.
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