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TMI Blog2014 (5) TMI 517X X X X Extracts X X X X X X X X Extracts X X X X ..... and 92A(2) of the Act. After considering the entire facts and circumstances of the present case and the findings of the DRP, we are of the opinion that the transactions taken place are with domestic enterprises and at least one among the AEs are not non-resident. Both the assessee and other parties which whom the assessee entered into transactions are the residents for the purpose of Indian Taxation. Any transaction between them will not constitute an international transaction. The transactions between the assessee and IJMII do not fall under section 92B(2) of the Act and same is the position in case of other entities with whom assessee carried on the impugned transactions - Provisions of transfer pricing not applicable - Decided against the revenue. - ITA No. 43/Hyd/2014 - - - Dated:- 29-4-2014 - Shri Chandra Poojari And Smt. P. Madhavi Devi,JJ. For the Appellant : Sri P. Soma Sekhar Reddy For the Respondent : Sri I. Rama Rao ORDER Per Chandra Poojari, A. M. This appeal by the Revenue is directed against the Directions of the Dispute Resolution Panel, Hyderabad dated 8.11.2013 for A.Y. 2009-10. 2. The Revenue raised the following grounds: 1. Wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ineering functions. As per the 3CEB report, the international transactions entered into by and between the taxpayer and its AEs during FY 2008- 09 are as under:- IMG 4. The Auditors PWC have prepared the TP study wherein it has worked out the operating profit separately in respect of MCD Civic Center, Sagar C-4, BC-4 BC-8 projects and AMEL C-2 project by working out OP/TC at 11.02%, 3.19%, 6.03%, 3.19% and 7.53% respectively based on the information provided by the taxpayer. It is thus claimed that the margins so computed are within arm's length range and hence no adjustment is required. 5. After rejecting the TP analysis conducted by the taxpayer, the TPO has made an independent analysis for selection of comparables under TNMM and selected 15 comparables as final comparables and the arithmetic mean PLI (OP/OC) which comes to 15.36% on sales as against the PLI of the taxpayer at -6.76% which is outside the arm's length range of plus/minus five percent. Out of the 15 comparable companies selected by the TPO, the taxpayer has objected to 13 companies, even though the same are engaged in similar activities. The TPO has also stated that out of the 13 comparables, 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia. The transactions done by the Company with IJM Corporation Berhad, MCD project office Delhi, IJM-IJMII JV and IJM-NBCC-VRM JV had been reported as international transactions in Form NO.3CEB as an abundant caution. 7. It was also submitted that the impugned transaction between the Company and IJM CORP MCD PROJECT OFFICE DELHI, IJM-IJMII JV AND IJM-NBCC-VRM- JV does not fall under section 92B(2) for the following reasons. (a) The Company and IJM CORP MCD PROJECT OFFICE DELHI, being resident PE and IJM-IJMII JV AND IJMNBCC- VRM- JV are residents of India for tax purposes. They pay their taxes in India. To fall under 92B( 1), the international transaction has to be between associated enterprises, at least one of whom is a non-resident. As all the parties are residents, the transaction between the Company and IJM Delhi Project Office and JV's do not constitute an international transaction. Even in the case of IJM Corp MCD Project office Delhi, the Project office is filing the income tax return under the status of permanent establishment before Income tax authorities, Delhi. Thus the basic premise for invoking the deeming fiction under section 92B(2) does not arise. (b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AEs are not non-resident. Both the assessee and other parties which whom the assessee entered into transactions are the residents for the purpose of Indian Taxation. Any transaction between them will not constitute an international transaction. The transactions between the assessee and IJMII do not fall under section 92B(2) of the Act and the same is the position in the case of other entities with whom the assessee carried on the impugned transactions. In our opinion, the argument of the Department is devoid of merit. Accordingly, we agree with the contention of the assessee's counsel on legal issue and allow the legal ground raised by the assessee. It is noted that the jurisdictional Hon'ble Income Tax Appellate Tribunal Hyderabad order in its own case relating to the Asst. year 2008-09 and also in the case of Swarnandhra IJMII Integrated Township Development Co. Ltd., VS DCIT, the transactions between the Company and IJM Corp Berhad MCD PE situated at Delhi, IJM-IJMII JV and IJM-NBCC-VRM JV are not the international transactions and hence, the said transactions between the Company and PE Joint Ventures are not to be treated as international transactions. Since as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a and, therefore, the JVs are to be treated as residents only. Transfer pricing regulation not applicable Further in the present case the transactions are between two resident parties as outlined at paras 3.18 and 3.19 of this order. There is no possibility of shifting of profits outside India or erosion of country's tax base. Therefore, its transactions with AEs are outside the purview of the transfer pricing regulations. This PE is assessed to income-tax in India in the status of foreign company in respect of its business profits. No shifting of profits outside India or erosion of taxes in India is involved, that is, there is no motive to shift the profits or evade the taxes in India inasmuch as its business profits are taxable as separate entity in India. The primary condition for attracting transfer pricing provisions is that there should be a transaction between two or more AEs in terms of section 92A(1) and 92A(2) of the Act. After considering the entire facts and circumstances of the present case and the findings of the DRP, we are of the opinion that the transactions taken place are with domestic enterprises and at least one among the AEs are not non-resident. Both th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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