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TMI Blog2015 (8) TMI 418X X X X Extracts X X X X X X X X Extracts X X X X ..... he Transfer Pricing Officer 3.erred in referring the Appellant's case to the Learned Transfer Pricing Officer ('TPO') under Section 92CA(l) of the Act, without satisfying the conditions specified therein; Rejection of economic analysis undertaken by the Appellant 4.erred in rejecting the transfer pricing analysis undertaken by the Appellant under Section 92C of the Act using 3 year weighted average data of comparables and determining the arm's length margin price using data only for financial year ('FY') 2008-09, which was not available to the Appellant at the time of complying with the transfer pricing documentation requirements; Selection/Rejection of comparables 5.erred in applying certain rejection criteria/ filters, in an arbitrary, subjective and erroneous manner for the purpose of selection of comparable companies; 6.erred in rejecting certain comparables selected by the Appellant disregarding the fact that they meet all the comparability criteria and also erred in introducing certain additional comparables, without appreciating that they cannot be considered comparable to the Appellant; Comparable companies selected by the Appellant 7.erred in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or having exceptional year of performance; Working Capital adjustment 16. erred in not granting the Appellant the benefit of the working capital adjustment which is required to be undertaken to account for the differences in level of working capital between the comparable companies and the Appellant in terms of Rule 10C(2)(e) of the Rules; Risk Adjustment 17. erred in not granting the Appellant the benefit of risk adjustments which is required to be undertaken to account for the differences in level of risks assumed between the comparable companies and the Appellant in terms of Rule I 0C(2)( e) of the Rules; Entity level approach visa- vis transaction level approach 18.without prejudice to Ground 01- 17,erred in computing the transfer pricing adjustment by applying the arm's length rnarkup to the entity-level cost and comparing the resulting arm's length price with the AE revenues only, instead of the entity-level revenue, thereby adopting an inconsistent approach; 19.without prejudice to Ground 01- 17, erred in computing the transfer pricing adjustment by adopting entity level approach, as again t re tricting the adjustment to international transaction with AEs only;Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) of the Act determining the income of the assessee at Rs. 53, 26,28,665/-.During the course of hearing before us the Authorised Representative (AR) did not press Ground Nos.1 to 8,12-13,22-23 and 28.Hence,same stand dismissed as not pressed. 2.First effective Ground of appeal(Ground no.9 to 21except ground no.12 and13),deal with the Transfer Pricing(TP)adjustments.During the assessment proceedings,the AO found that the assessee had entered into various international transaction with its AEs.He made a reference u/s.92CA(1) of the Act to the transfer pricing officer (TPO). The TPO found that the assessee had opted TNMM method for determining the arms length price(ALP) for the international transactions, amounting to Rs. 344. 34 crores,that the profit level indicator (PLI) was taken as operating profit/operating cost(OP/OC),that the assessee had identified 28 companies as comparables.In the TP report the mean/average margin for the AY.s. 06-07, 07-08 and 08-09 were used, as the data for AY.under appeal were not available in the case of all the comparables at the time of conducting bench marking.The assessee had shown PLI (OP/TC) @ 17.38%.He directed the assessee to submit updated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inalised their audited accounts much before 30/9/2009, that the assessee had failed to furnish any evidence to show that it had made reasonable efforts to access the current year data either on data base or otherwise, that most of the comparable selected by the assessee were listed companies who had published their accounts for the year ending 31.3.2009 before 30thSeptember 2009, that the TP report was to be prepared by Oct.,2009.He proposed TP adjustment of Rs. 37.70 Crores.Accordingly,the AO issued a draft assessment order. 3.Aggrieved by the proposed additions,the assessee filed objections before the DRP and made elaborate submissions.Vide its order,dated 30.12.2013,the DRP upheld the order of the TPO with regard to TP issues.For domestic law issue it directed the AO to verify the claim of the assessee. 4.During the course of hearing AR stated that the DRP had not discussed anything about the objections raised by the assessee with regard to the comparables and working capital adjustmen -ts,that the DRP had erred in rejecting CG-VAK software and exports,SIP Technologies and Exports Ltd.,R.S.Software(India)Ltd.,as comparables,that it erred in considering certain addition -al com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d done a systematic search and identified comparables from the accept reject method of the taxpayer's search itself,that the TPO had applied proper filters and obtained segmental accounts. In our opinion,these observations are very general and do not deal with the specific objections raised by the assessee.The DRP is supposed to support or distinguish the comparables,when the assessee files objection citing the decided judgments.In the case before us,the DRP has not discussed merits of any of the comparables objected to by the assessee.Similarly,the final decision of the DRP about FAR analysis is very general.Being the first appellate authority it is the duty of the DRP of pass a reasoned order after meeting the arguments raised by the assessee.An order without reasons is no order in the eyes of law.We find that vide Circular no.5 of 2000 dated 03.06.2010,the CBDT had given all the powers of CIT (A) to the DRP and it was supposed to perform the same duties of the CIT(A).Circular specifically provides that the 'DRP shall issue directions after considering the objections filed by the assessee (sub clause b),and evidence furnished by the assessee(sub clause c).But,the DRP in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee while adjudicating the appeal for the AY.2007-08.He referred to the page no.443to445 of the paper book.DR left the issue to the discretion of the Bench. 6.2.We have heard the rival submissions and perused the material on record.We find that the Hon'ble Bombay High Court has decided the issue as under: "1. Although two questions of law are raised by the revenue in this appeal, counsel for the revenue fairly states-that second question does not arise out of the order of the ITAT. The first question raised by the revenue in this appeal reads thus .- "Whether on the facts and in the circumstances of the case, the Tribunal, in law, was right in holding that the communication charges, professional fees and expenses incurred in foreign exchange for travelling should be reduced from the total turnover as well as well as from export turnover for applying the provisions of Section 10A of the Income tax Act, 1961?" 2. Counsel for the parties state that the aforesaid question stands answered against the revenue in view of the decision of this Court in the case of CIT V/s. Gem Plus Jewellery India Ltd. Reported in [2011] 330 I.T.R. 175(Bom.) In this view of the matter, we see no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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