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TMI Blog2014 (12) TMI 515X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing: Rejection of transfer pricing documentation maintained and undertaking fresh search of comparables: 1. Rejection of the transfer pricing documentation maintained by the assessee in accordance with the provisions of the Act read with the Income Tax Rules, 1962 ('Rules') and undertaking a fresh economic analysis during the course of assessment proceedings and accordingly making an adjustment of Rs. 5,78,43,157 to the international transactions relating to provision of ITES to its AE. Selection of tested party 2. Selecting AHSL as tested party for computing ALP; Rejection of use of multiple year data 3. Rejecting the use of multiple year data and using data for the FY 2007-08 only; Information obtained under section 133(6) 4. (a) Using information/documents obtained by exercising powers u/s. 133(6) of the Act which are not available in public domain; and (b) Further not providing any opportunity to Appellant to cross-examine the same. &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roviso to section 92C(2) of the act in limiting the adjustment at a variation of 5 percent to the arm's length price; Corporate guarantee provided to the AEs 10. (a) Applying the provisions of Section 92 of the Act to a transaction which was not entered in the books of account; (b) (i) Erred in holding that the corporate guarantee provided by the Appellant, is an 'International Transaction' covered under the definition provided u/s 928 of the Act; (ii) Erred in not appreciating the fact that the computation mechanism fails in determination of the Arm's Length Price ('ALP'), as prescribed under Rule 108 of the Income-tax Rules, 1962; (iii) Erred in disregarding the internal comparable provided by the Appellant; (iv) Erred in determining the ALP on the corporate guarantee @ 4.12% p.a. on the guarantee amount without undertaking any economic analysis for the same. (c) Erred in not appreciating the fact that corporate guarantee was not included in the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee to its AE. Consequently, the Assessing Officer proposed the draft assessment order taking into account the TP adjustment made by the TPO. The assessee raised its objections to the draft assessment order before the DRP which partly allowed the objections of the assessee and the Assessing Officer thereafter has passed the assessment order in accordance with the directions of the DRP. The learned counsel for the assessee submitted that the TPO has made TP adjustment in excess of the profits of the group. He submitted that the assessee company being the parent company of the group, all the profits have to flow back to India and therefore, the TP adjustment cannot be higher than the consolidated profits of the group. He submitted that the DRP has considered this objection of the assessee and has accepted the same but the Assessing Officer has failed to give effect to the order of the DRP. The learned counsel for the assessee submitted that the company's consolidated financial result for the year is a loss, and further due to tax holiday in India, the tax rate of the AEs is much higher and there is no incentive for shifting of profits outside India. It was also submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been received under sub-section(2), issue such directions, as it deems fit, for the guidance of the Assessing Officer, to enable him to complete the assessment. Sub-section (10) of S.144C provides that every direction issued by the DRP shall be binding on the Assessing Officer. In view of the same, the Assessing Officer ought to have given effect to the directions of the DRP. Therefore, we are of the opinion that the issue needs to be remitted to the file of the Assessing Officer to recompute the Transfer Pricing Adjustment, duly complying with the directions of the DRP that the TP adjustments shall not exceed the global profits earned by the assessee company. Accordingly, this issue is remitted to the file of the Assessing Officer for compliance with the directions of the DRP after giving reasonable opportunity of hearing to the assessee. This additional ground of appeal raised by the assessee is thus allowed. 11. The second additional ground of appeal raised by the assessee, by letter dated 16th April, 2014 is also admitted as all the relevant facts are already on record. Since the issue of computation of transfer pricing adjustment has been remitted to the file of the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Bench of the Tribunal in the case of Biocon Ltd. (supra), wherein the Special Bench has held as under:- "11.3. We, therefore, sum up the position that the discount under ESOP is in the nature of employees cost and is hence deductible during the vesting period w.r.t. the market price of shares at the time of grant of options to the employees. The amount of discount claimed as deduction during the vesting period is required to be reversed in relation to the unvesting/lapsing options at the appropriate time. However, an adjustment to the income is called for at the time of exercise of option by the amount of difference in the amount of discount calculated with reference the market price at the time of grant of option and the market price at the time of exercise of option. No accounting principle can be determinative in the matter of computation of total income under the Act. The question before the special bench is thus answered in affirmative by holding that discount on issue of Employee Stock Options is allowable as deduction in computing the income under the head 'Profits and gains of business or profession'." Respectfully following the above d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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