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TMI Blog2013 (9) TMI 334X X X X Extracts X X X X X X X X Extracts X X X X ..... sing mainframe, mini and micro computers, etc. The assessee-company is providing software services in the form of information technology solutions, information technology services, information technology practice assistance and support software development and modification. In the previous year relevant to the assessment year under appeal, the assessee had reported sales of software services to its associated enterprise (AE) at Rs. 18.49 crores. In the light of the above transaction entered into with the associated enterprise, the question of determining the arm's length price (ALP) was referred to the Transfer Pricing Officer (TPO) under section 92CA(1) of the Act. The assessee has adopted the transactional net margin method (TNMM) as the most appropriate method to arrive at the arm's length price. The assessee has filed a very detailed transfer pricing study report before the Transfer Pricing Officer. On going through the explanations made by the assessee-company, the transactional net margin method adopted by the assessee-company was approved by the Transfer Pricing Officer. The Transfer Pricing Officer has recorded his finding that on the basis of the functions performed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and finally the assessee-company zeroed down to a comparable list of 6 companies. The average profit level indicator of the above six companies worked out to 18.04 per cent., i.e., the arm's length price determined on the basis of the ratio of operating profit to total cost of the assessee-company has been worked out to 18.04 per cent. This resulted in computing the operating profit at Rs. 4.15 crores against a total cost of Rs. 23 crores. The Transfer Pricing Officer, after following all the methods and procedures adopted by the assessee-company, gave a single different treatment in respect of the comparables selected for the study. The Transfer Pricing Officer made his list of comparable companies and worked out the ratio of operating profit to total cost at 27.52 per cent. This revised profit level indicator worked out by the Transfer Pricing Officer brought out an operating profit of Rs. 8.73 crores. But the operating profit returned by the assessee was Rs. 4.15 crores. The differential amount is Rs. 4.58 crores. The value of sales, as admitted by the assessee, made to its associated enterprise is Rs. 18.49 crores. The Transfer Pricing Officer added the above stated differ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terprise was not in accordance with rules. The Transfer Pricing Officer has no case that the assessee-company has not maintained proper information and documentation relating to the international transactions. There is also no dispute for the Transfer Pricing Officer on the information and data used in the computation of the arm's length price, which related to the financial year 2002-03. There are no such other failures on the part of the assessee. It is seen that the Assessing Officer has rejected the cases of comparison provided by the assessee-company without stating any reason. In the case of M/s. Antarix Eapplication Ltd., the assessee-company has not relied upon the same for the reason that the area of comparability is not the same. But the Transfer Pricing Officer took the opposite view without stating any reason. Likewise, in the case of M/s. E.Star Infotech Ltd., the assessee-company opted it out for the reason that the said firm was providing more of information technology services rather than software services. This is also turned down by the Transfer Pricing Officer without stating any reason. This is the case with many other comparables like M/s. Fortune Informatics ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment year 2005-06, in coming to the above conclusion. In the present case, the Commissioner of Income-tax (Appeals) has followed the earlier order of the Tribunal on the subject. Therefore, we find that the Commissioner of Income-tax (Appeals) is justified in holding that the assessee-company is entitled for the benefit of deduction available under section 10A of the Act. No other ground is raised in this appeal filed by the Revenue. In the circumstances, the appeal filed by the Revenue is liable to be dismissed. Next we will consider the cross-objection filed by the assessee in C. O. No. 84(Mds)/2009. The first objection of the assessee is that the Commissioner of Income-tax (Appeals) has failed to appreciate that the incomeescaping assessment order is without jurisdiction and contrary to facts and law. On going through the facts of the case, we find that there is no much force in this argument advanced by the assessee. The second objection raised by the assessee is that the Commissioner of Income-tax (Appeals) has erred in confirming the disallowance of dividend tax delay charges, interest for delay in remitting TDS, expenses incurred for delay in UTI dividend payments, et ..... X X X X Extracts X X X X X X X X Extracts X X X X
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