9911796707
TMI Blog2012 (9) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... e for the year under consideration was filed by the assessee company on 27.10.2007 declaring total income of Rs. 21,47,56,506/-. During the course of assessment proceedings, the AO noted that the assessee company has entered into the following transactions with its Associated Enterprises (AEs). Sr. No. Nature of Transaction Amount Method used 1 Import of raw material, inputs and finished goods 1,331,989,876 TNMM 2 Export of finished goods 7,721,483 TNMM 3 Imports of capital goods 6,376,582 TNMM 4 Payment for service availed 43,708,072 TNMM 5 Receipt for services provided 19,049,179 TNMM 6 Receipt of commission income 4,856,567 TNMM 7 Reimbursement of Travel, communication and Other expenses received/receivable 10,532,324 CUP 8 Reimbursement of Travel, communication and Other expenses received/receivable 3,737 CUP Total 1,424,237,820 Keeping in view the above international transactions entered into by the assessee company with its AEs, reference was made by the AO to the Transfer Pricing Officer (TPO) u/s. 92CA(1) on 27.07.2008 for computing Arm's Length Price in relation to the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directions of the DRP, addition to that extent was made by the AO in the order dated 29.10.2011 passed u/s. 143(3) r.w.s. 144C(13) of the Act. Against the said order, the assessee has preferred this appeal challenging inter alia the addition made by way of TP adjustment. 5. We have heard the arguments of both the sides and also perused the relevant material on record. The Ld. Counsel for the assessee has mainly raised four contentions in support of the assessee's case while challenging the addition made by way of TP adjustment. The first contention raised by him is that out of the 11 comparables finally taken as per the direction of DRP, at least three comparables namely BHEL, REL and L&T having turnover of Rs. 19,067 crores, Rs. 5,752 crores and Rs. 17,971 crores respectively as against the annual turnover of Rs. 238 crores of the assessee should be excluded for the purpose of 'comparability analysis'. The turnover of the said companies thus was 80 times, 24 times and 76 times of the turnover of the assessee company in the relevant year. In the case of Dy. CIT v. Deloitte Consulting India (P.) Ltd. [2011] 12 taxmann.com 500 (Hyd.) cited by the Ld. Counsel for the assessee, one of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t sales should not be excluded from the profitability of the assessee. On this aspect also, we must uphold the grievance of the assessee." 7. Respectfully following the order of the Tribunal for AY 2006-07 (supra), we direct the AO to include commission income in the operating profit of the assessee for the purpose of computing its OPM. 8. As regards the provision for liquidated damages, the Ld. Counsel for the assessee has submitted that the assessee company has an arrangement with its customers wherein any delay in the order completion is compensated on a mutually agreed basis. He has submitted that this arrangement is in line with industry norms and is made in the normal course of business. He has contended that the same is operating in nature and will have to be considered while working out the operating profit margin of the company. We find it difficult to accept this contention of the Ld. Counsel for the assessee. The liquidated damages are required to be paid only when there is a delay in completion of the order by the assessee company which event is only a contingency and cannot be a regular feature of the business. Moreover, there is nothing on record to show the basis o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s with AE. Respectfully following the said decisions of the co-ordinate Benches of this Tribunal, we direct the AO to make the TP adjustment, if any, only in respect of transactions with AE. 12. As submitted by the Ld. Counsel for the assessee before us, if the contentions raised by him are accepted and the difference between the Arm's Length Price and value of International transactions of the assessee company with AEs are recomputed, the difference therein would be finally less than 5%. He has also prepared and furnished the working based on such re-computation to show that such difference being less than 5% i.e. within the safe harbour limit, no adjustment on account of transfer pricing is required to be made in this case. We have already dealt with the contentions raised by the Ld. Counsel for the assessee and have given directions to the AO to recompute the difference as per the decision rendered on each contentions raised by the Ld. Counsel for the assessee. The AO is therefore directed that if such difference as recomputed by him is within the safe harbour limit of 5%, no addition should be made on account of TP adjustment to the income of the assessee. Ground no. 1 of the ..... 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