9911796707
TMI Blog2015 (8) TMI 923X X X X Extracts X X X X X X X X Extracts X X X X ..... dmitted as the arguments that they could not be filed before the DRP in the absence of any fact on record cannot be disbelieved especially since the evidences filed before the DRP itself were filed during the fag end of the proceedings - Decided in favour of assessee for statistical purposes. Obsolescence of Inventory disallowance - Held that:- In the immediately preceding assessment years and the judgement of the Hon’ble High Court where for want of necessary evidences the action of the AO was confirmed. It is seen that the Hon’ble High Court while deciding against the assessee also observed that the assessee was not precluded from placing necessary evidences in subsequent years in support of its claim. Accordingly, following the orders of the Co-ordinate Benches which are supported by the judgement and order of the Jurisdictional High Court, the issue is restored to the AO. While doing so, it is directed that the assessee shall place necessary supportive evidences justifying its claim by way of it Global Obsolescence Policy, establishing that specific models/accessories etc. had gone out of the market based on their surveys and marketing Reports based on the sales data of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vour of revenue. Double Disallowance - Held that:- Accordingly in the light of the submissions advanced by the parties, we direct the AO to consider the submissions of the assessee that there may be no double disallowance qua the expenditure on cell phones and accessories given free of cost to service centres etc. and the AMP expenditure. Contract Software Development - TPO show caused the assessee to explain why the filters applied by the assessee for selecting the comparables be not rejected and substituted by the filters of the TPO as the assessee has used multiple years data and selected inappropriate 12 comparables with an average margin of 8.42% - Held that:- TPO/Revenue has resorted to ‘cherry picking” is found to be not supported by record. Since no arguments have been advanced to assail the appropriateness of the reasoning of the DRP to uphold the filters selected by the TPO and no arguments have also been advanced on facts assailing the reasoning of the DRP to retain the 13 comparables with arithmetical correction in OP/TC percentage, the correctness of the same is not being gone into. On the appropriateness of the filters and the comparables no finding is being giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following grounds :- 1. That, the impugned order of assessment framed by the learned Additional Commissioner of Income-tax, Range 13, New Delhi (hereinafter referred to as the learned AO ) in pursuance to the directions of the Hon ble Dispute Resolution Panel - II (hereinafter referred to as the Hon ble DRP ) under section 143(3) read with section 144C of the Income-tax Act, 1961 ( Act ), is bad in law and contrary to the settled position of law. 2. Without prejudice, the Hon ble DRP/ learned AO have grossly erred in computing the income of the appellant at INR 15,204,416,770/- as against the returned income of INR 9,099,853,004/-. 3. That on the facts and circumstances of the case and in law, the Hon ble DRP 1 learned AO have erred in disallowing net marketing expenditure of INR 774,839,472 (total expenditure of INR 911,575,849 net of tax depreciation @ 15 percent) incurred on account of mobile handsets issued free of cost to After Marketing Service Centres ( AMSCs ), Dealers and Employees. 3.1 The Hon ble DRP/ learned AO have erred in concluding that expenditure incurred annually on mobile handsets issued free of cost to AMSCs, Dealers and Employees results in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble DRP/ learned AO erred in making an adjustment aggregating to INR 4,082,768,410 out of the proposed adjustments made by the TPO u/s 92CA aggregating to INR 4,310,815,993 and only granting a partial relief of INR 228,047,583. 6.4 That the learned DRP has completely misconceived the facts and has grossly erred in endorsing the findings of the TPO that the appellant was promoting Nokia brand instead of appreciating that the assessee company was only carrying out its business by using the well established brand name of Nokia. 6.5 That the learned DRP has further failed to comprehend that, the appellant had not incurred any expenditure to promote the brand name of Nokia and that the entire expenditure as had been incurred by it on advertisement and marketing, had been incurred by it, solely for the purpose of its own business in India and any incidental benefit arising to its parent could not result in an adjustment in the hands of the appellant. 6.6 That the learned DRP has erred in concluding that in light of the explanation added to section 92B(2) by Finance Act, 2012, advertisement expenditure incurred by the appellant qualifies as international transaction und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the appellant has rendered a service to the AEs by incurring the AMP expense and by holding that a markup has to be earned by the appellant in respect of the alleged excessive AMP expenses. 6.13 That, without prejudice and in the alternative, the learned TPO has arbitrarily applied a markup of 12.5 percent in respect of appellant s alleged excessive expenses by considering State Bank of India Prime Lending Rate ( SBI PLR ) as a benchmark. The said findings and observations resulting into enhancement of income is highly arbitrary and wholly unjustified being without any basis. 6.14 That on the facts and the circumstances of the case and in law, without prejudice, if at all a markup of 12.5 percent was to be applied, the same should have been applied on the value added expenses incurred by the appellant for providing the alleged service in the nature of brand promotion as contended by the learned TPO. 6.15 That, the learned AO/TPO have erred in making transfer pricing adjustment amounting to INR 354,167,266 in relation to provision of software development services by the appellant to its AEs. 7.1 That on the facts and the circumstances of the case and in law, the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the operating profit margins of the com parables. 7.9 That on the fact and the circumstances of the case and in law, the learned TPO / Hon ble DRP have erred in not allowing a risk adjustment to the appellant on account of the fact that as the appellant (vis-a-vis its R D segments) is remunerated on an arm s length cost plus basis, i. E. it is compensated for all its cost plus a preagreed mark-up, the appellant undertakes minimal business risks as against comparable companies that are full fledged risk taking entrepreneurs. 8. That on the facts and circumstances of the case and in law, the learned AO / TPO / Hon ble ORP have erred in law in not applying the Proviso to section 92C of the Act and failing to allow the benefit of downward variation of 5 percent in determining the ALP. 9. That on the facts and circumstances of the case and in law, the learned AO has erred in levying consequential interest under section 234B and section 234D of the Act. 10. That on the facts and circumstances of the case and in law, the learned AO has erred in initiating penalty proceedings under section 271 (1)(c) of the Act. 2. The relevant facts of the case are that the assessee in the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and vide 6.12 to 6.14 the mark-up thereon has been agitated. Vide Ground No.-6.15 to 7.9, TP issues on software development and comparables considered have been agitated. Vide Ground No.-8 of the denial of benefit of downward variation of 5% in ALP has been agitated. Ground No.-9, it was submitted is consequential and Ground No.-10 was stated to be premature. Marketing expenditure claims 3. Addressing ground nos.-3 to 3.2, it was his submission that by the said ground the assessee is agitating its grievance posed in the impugned order wherein a disallowance of marketing expenses to the tune of ₹ 77,48,39,472/- has been made. It was his submission that the said issue in the earlier years has been set aside to the file of the AO by the Tribunal in assessee s own case. Attention was invited to the copies of the orders attached in the paper book. 3.1. The facts qua the said issue are found discussed at page 3 of the impugned order, it is seen that the assessee claimed marketing expenses amounting to ₹ 491,32,60,014/-. The AO observed that similar claims have been made in the earlier years. The marketing expenditure including cost of mobile handsets free of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO to allow depreciation on the WDV of FOC handsets of earlier years provided no relief has been granted by the appellate authority treating it as revenue expenditure. 3.4. Considering the same, the AO decided the issue vide para 2.7 and 2.8 in the following manner :- 2.7. In this context, it is stated that the assessee has already been allowed depreciation to the tune of ₹ 13,67,36,377/- for the year under consideration. However, with regard to depreciation of marketing expenses of earlier years, the issue is pending before various appellate authorities as to whether the said marketing expenses were capital expenditure or revenue expenditure. 2.8. Furthermore, the assessee has not produced any evidence of withdrawal of appeal on this issue. Hence, the depreciation on WDV of previous year FOC pertaining to the earlier years can only be considered after finalization of appeals of earlier years before ITAT. Even the directions of DRP-II on this issue are conditional, inasmuch as, no relief should have been provided by any appellate authorities in respect of the same. Hence, respectfully following the directions of DRP-II, supra, no further depreciation is grant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see is operating in a highly competitive and price sensitive market. That the sales of the handsets of the assessee and its market share to a large extent depends on the prices of the handsets launched and variety offered by it vis- -vis the prices and variety offered by its competitors. It was explained that due to various factors such as change in handset prices by the competitors, life of the model, market demand of the model, prices of the handset are required to be varied/reduced. It was submitted that in case of such price changes, the distributors of the assessee may suffer loss in respect of stock lying with them (as they would be required to sell the handsets at a price lower than the one at which the same were purchased from the assessee). Accordingly in the year under consideration, the assessee incurred an amount of ₹ 359,96,66,863/- as price protection provided to various distributors. The assessee also placed on record and relied upon confirmations from few distributors confirming the amount of price protection provided to them by Nokia India namely HCL Info Systems amounting to ₹ 237,76,70,795/-. 4.1. In the said background, the AO considering the repl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letter from HCL Infosystems Ltd. was merely an acknowledgement of Credit notes received and did not contain any details of any agreement entered into between the assessee and the said company. The said facts in the background where sales commission and discounts were already being offered to its distributors and retailers, the occasion to further offer price protection also was required to be justified, especially in the absence of any document showing that the distributors were entitled to any such compensation as the assessee is operating its own outlets in many places. The AO also observed that there was no evidence to show that price protection has been passed equally to the customers and it was merely a book entry without any basis and without supporting documentary evidences. As such it was held that the assessee had failed to adduce any cogent evidence to show that the price protection offered to its distributors actually related to the business needs of the assessee company. 4.3. However taking note of the fact that the in 2007-08 assessment year, the DRP-II had directed that price protection expenses in respect of HCL Info System claimed by the assessee be allowed, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.5. Aggrieved by this, the assessee is in appeal before the Tribunal. Ld. AR in the context of the above facts requested for admission of additional evidence for which purpose petition under Rule 29 had been moved by the assessee inviting attention to the DRP s observations at para 2.4 at page 35 37 of the said order (reproduced above). It was his submission that a perusal of the same would show that after admitting additional evidence, the DRP takes note of the fact that the AO has not been able to make any further enquiries about the genuineness of these confirmations. In the above circumstances, the DRP proceeded to consider the confirmations and faulted the same on the ground that these were stereo type confirmations from different parties wherein the language of confirmations is almost the same and in some of the confirmations even the telephone numbers of the distributors were not given as such it was held that the benefit of price protection charges as per assessee s claim could not be made available. Considering the evidence of the remaining 57 distributors, it was held that the assessee could not file any confirmations and had only filed copies of ledger accounts whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration. It was his submissions that no doubt the DRP also gives the reasoning that time was not sufficient for making further inquiries by the AO but the fact remains that the DRP also holds that the evidence submitted is not reliable evidence as such failing to inspire any confidence was rightly rejected. In regard to the admission of fresh evidence, it was his submission that the same should have been placed before the DRP and no purpose would be served by admitting the same as evidence admitted itself lacks credence. 4.7. It was also emphasized that no document showing that the distributor was entitled to the said price protection or that the assessee was liable to make such a payment had been filed which would have been the relevant evidences as some Agreements would have been entered into. No argument that any regular stock audit was done by the company to identify the type of handsets lying with the distributors has been filed which requires to be protected by the alleged price protection policy of the assessee. Apart from that, it was also submitted that no price protection policy has been filed nor any basis of calculation inspiring any confidence in the book ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilable and paid to the distributors/dealers. Accordingly while admitting fresh evidences filed before us the AO is directed to consider them alongwith the evidence which had been filed before the DRP. We further direct the assessee to place necessary and relevant evidences as brought out above and also find mentioned in the assessment order to justify its claim. Liberty to file fresh evidences before the AO is granted and the AO shall be duty-bound to consider the same before the passing of his order. Needless to say that a speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard shall be passed by the AO. Obsolescence of Inventory 5. The facts pertaining to the next issue agitated by the assessee are found discussed at pages 13-16 of the impugned order in paras 6 to 6.7. A perusal of the same shows that the assessee in the year under consideration had debited a sum of ₹ 9,98,40,000/- under the head provision/(Release) for obsolescence. Referring to the position in assessment years 2003-04, 2004-05 2006-07 wherein the AO had made a disallowance on this count to the extent of 25% following the upholding of the said di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son to deviate from the orders of the earlier years and, accordingly, uphold the disallowance of ₹ 2,49,60,000/- on account of provision for obsolescence. 5.4. Accordingly, a disallowance of the said amount made by the AO was confirmed. Aggrieved by this the assessee is in appeal before the Tribunal. The LD. AR inviting attention to the position in 2006-07 and 2007-08 assessment years (copies placed at pages 1005 to 1026 and 1027 to 1045) referring to specific page 1024 requested that the issue may be restored to the AO. It was further elaborated that the Hon ble High Court in 2000-01 2001-02 while upholding the action of the AO for want of evidence in the said years had categorically stated that it was open to the taxpayer to lead necessary evidence and get necessary relief in other years. 5.5. The CIT DR placed reliance upon the impugned order however he did not dispute the factual position that in 2006-07 2007-08 assessment years, the issue for considering the evidence was restored by the Tribunal to the AO. 5.6. We have heard the rival submissions and considered the order of the Coordinate Benches in the immediately preceding assessment years and the judgeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding and manufacturing of mobile handsets, spare parts and accessories. In addition to this activity, the company also undertakes contract software development for its AEs. 6.2. Considering the TP documentation, the TPO observed that the assessee has incurred advertisement, marketing and promotion (hereinafter referred to as the AMP ) expenses on behalf of its AE. Apart from that he also questioned the adequateness of the margin earned in the international transaction related to provision of software development services. The TP adjustments made by the AO qua the AMP were confirmed in toto and qua the software development services partial relief was given by the DRP. Aggrieved by these action the assessee is in appeal. 6.3. The facts qua the same are found discussed at pages 6 to 9 of the assessment order vide paras 3-3.9. A perusal of the same shows that the assessee s case in the year under consideration was referred to the TPO to determine the Arms Length Price (referred to hereinafter as the ALP ) u/s 93CA(3) of the Income Tax Act in respect of the international transaction entered into by the assessee during the financial year 2007-08. The TPO vide his order dated 24.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has filed qua the AMP expenses ground no-6-6.14. However, keeping in mind the precedent value of the order of the Special Bench and being bound by the said judgement, ground no-6, 6.1, 6.2, 6, 6.7, 6.8, 6.9 6.10 technically can be said to be covered against the assessee by the order of the Special Bench. It was submitted that it may be recorded that the grounds are agitated by the assessee but judicial propriety demands that the present forum has to dismiss them. Accordingly though specific grounds have been raised the submission on behalf of the assessee was that its prayer to restore the to the TPO for determination of the cost/value of the international transaction of brand/logo promotion on account of alleged high AMP expenses may be allowed by directing the TPO to consider necessary relief considering the 14 questions which are required to be considered as mandated by the Special Bench. It was his submission that the stand of the assessee is that being a Distributor for major portion of the activity of the assessee, the risk borne is very limited and this fact was agitated before the DRP and would be evident from internal page-3 of the order of the DRP-II dated 28.09.2012 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t level of each Business group. Nokia Corporation (or Nokia Inc for security and connectivity related products) sells the products either to sale subsidiaries or directly to customers. The sales subsidiaries are not allowed to further sell the purchased products between themselves. (Bold texted for emphasis) 6.5.1. The Ld. AR submitted that in the decision of the Special Bench in L. G. Electronic s case, the arguments on behalf of the Revenue had been lead by him as such being conscious of the fact that some of the arguments advanced on behalf of the assessee qua the said claim had not been accepted by the Special Bench in the case of LG Electronics, it was his submission that it maybe recorded that the assessee continues to reiterate the same in support of its claim in order to keep the issue alive. However ground no-6.4 it was submitted can be considered in the present case whereby following the Special Bench, the issue may be restored to the TPO/AO with the direction to consider the 14 parameters set out in the order of the Special Bench. The other grounds though agitated in view of the order of the Special Bench may have to be dismissed as being covered against the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been assailed. The record shows that the TPO has calculated the AMP/sales ratio of the assessee as 2.33% and the mean of the AMP/sales ratio of the 4 comparables accepted is 0.76% which was taken as the bright line and apply the same the difference of ₹ 331,43,12,128/- was taken as the amount representing spent to create a marketing intangible for the benefit of the AE which should have been re-imbursed by the AE alongwith a mark-up. Justification for applying the mark-up given by the TPO it is seen was that the assessee had blocked its funds and had provided a service to the AE. The TPO held that no independent party would have blocked its funds and provided a service without expecting a return over and above the re-imbursement of the blocked funds. The fact that legal ownership of the brand vested with the AE was also a factor taken into consideration. For applying the rate of mark-up, the Prime Lending Rate of State Bank of India was taken as sufficient to cover the blocked funds and remuneration for services rendered as a result adjustment purposed made was ₹ 372,86,01,144/-. This was confirmed by the DRP and resulted in the passing of the impugned assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omotion of its brand in any form, such as subsidy on the goods sold to the Indian AE? 10. Where such subsidy is allowed by the foreign AE, whether the amount of subsidy is commensurate with the expenses incurred by the Indian entity on the promotion of brand for the foreign AE? 11. Whether the foreign AE has its presence in India only in one field or different fields? Where it is involved in different fields, then is there only one Indian entity looking after all the fields or there are different Indian AEs for different fields? If there are different entities in India, then what is the pattern of AMP expenses in the other Indian entities? 12. Whether the year under consideration is the entry level of the foreign AE in India or is it a case of established brand in Inda? 13. Whether any new products are launched in India during the relevant period or is it continuation of the business with the existing range of products? 14. How the brand will be dealt with after the termination of agreement between AEs? (Bold texted for emphasis) 6.6.1. Accordingly to re-capulate, it is seen that in the facts of the present case, the assessee is a Distributo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the benefit with hindsight should not be made available to the assessee due to the order of the Special Bench as the assessee has not acknowledged that AMP is an international transaction and the narrations given in the Credit notes should not now be allowed to be improved. We hold that the assessee shall not be allowed to re-write the narration and the narration should be treated as frozen in time. 6.6.4. We also concur with the departmental stand and hold that the application of bright line test applying the precedent settled by the Special Bench and so hold that the same has been correctly applied in principle in order to determine the nonroutine functions which have been performed by the assessee applying the mean AMP sales ratio of the comparables. It is also upheld that the assessee has contributed to building the brand of the AE who holds the legal rights of the brand as such the grounds assailing the action of the TPO and the DRP in upholding the bright-line test are dismissed; the ground that it is not an international transaction is also dismissed, relying upon the precedent settled by the Special Bench. 6.6.5. The grounds assailing the application of the mar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.6.7. In terms of the above observations and directions, the legal issues are decided in Revenue s favour and on facts the issue is restored to the TPO to calculate ALP of the AMP in line with the directions of the Special bench. Double Disallowance 7. For the next issue addressed by the assessee vide Ground no-6.11, the limited prayer of the Ld. AR was that the AO may be directed to look into the aspect that there should be no double disallowance. The Ld. CIT DR though relied upon the impugned order however did not oppose the request addressing the legitimate concerns of the assessee. Accordingly in the light of the submissions advanced by the parties, we direct the AO to consider the submissions of the assessee that there may be no double disallowance qua the expenditure on cell phones and accessories given free of cost to service centres etc. and the AMP expenditure. Contract Software Development 8. A perusal of the TPO s order shows that the TPO show caused the assessee to explain why the filters applied by the assessee for selecting the comparables be not rejected and substituted by the filters of the TPO as the assessee has used multiple years data and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that have sales greater than zero and ratio of other income to sales greater than 50% over the time period under consideration This is an inappropriate filter. The correct filter would be to select companies that have ratio of service income to total income equal to or greater than 75%. This will ensure that only those companies that have service income are selected and companies that have significant income from manufacturing or trading activities are rejected. Thus the data for comparability would be more robust and functionally similar to the assessee. 3. Companies with ratio of R D expenses to sales less than 3% were selected. This is not an appropriate filter as in the R D that a company may carry out will not affect the margins in the ITES segment. If anything, it will only depress the margins. Besides this, a filter of R D expense is not relevant when we are looking for companies in the ITES sector. If the filter of rejecting companies with ratio of service income to total income of less than 75% is properly applied, there is no need for this filter. In fact the filters used by the assessee of selecting co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al pronouncements that support the use of current year data. (ii) Reject companies where turnover is less than ₹ 1 Crore:- This filter is applied because where the turnover and cost base is very small, it is more than likely that the margins will be erratic. That apart, a company that is very small in size does not have sufficient economic significant that it be used as a benchmark. (iii) Select companies where the ratio of service income to total income is atleast 75%:- The use of this filter is to ensure that we choose companies that are primarily in the service sector. The application of this filter will ensure that companies with significant income from manufacturing and trading are not selected. You have argued for placing this threshold at 50%. This will be an inappropriate limit as this will allow companies that have significant incomes from manufacturing and trading activities to be used as comparables. In your case your entire income is from provision of services. It would not be right to allow you to be benchmarked against a company that has 50% of its income from manufacturing or trading activities. This will ensure integrity of all comparable data. (iv) S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee was show caused why software development services be not recalculated as under:- Accordingly, the arm s length price of the international transaction related to the provision of software development services is proposed to be recalculated as below:- Total Cost : Rs.2,718,088,000 ALP at a margin of 30.8% : Rs.3,556,346,339 Price received : Rs.2,853,992,000 Difference : Rs.702,354,339 8.1.3. The record shows that the reply of the assessee was considered and the mean OP/TC percentage of the 15 comparables was taken as 26.42% and finally ALP of ₹ 58,22,14,849/- was proposed as under :- 9. Based on the analysis that has been carried out in the preceding para s the comparables that shall be used to benchmark the assessee s transaction related to provision of software development services are as below: S. No. Name of comparable OP/TC(%) 1. Akshay Soft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee having regard to the arm s length price so determined: Provided that no deduction under section 10A [or section 10AA] or section 10B or under Chapter VI-A shall be allowed in respect of the amount of income by which the total income of the assessee is enhanced after computation of income under this sub-section. 8.2.1. The DRP considering the submissions on behalf of the assessee removed Aricent Technologies (Holdings) Ltd. and Cybermate Infotek Ltd. from the list of comparables. The margins calculated by the assessee for RS Software (I) Ltd. and Sasken Communication Ltd. (Seg.) as alleged by the assessee were corrected. Consequently the comparables considered by the TPO as 15 were reduced to 13 resulting in average OP/TC percentage after corrections in the calculations worked out to 18.3 percentage and the ALP adjustment in Software Services segment was reduced to ₹ 35,41,67,266/-. 8.3. Aggrieved by this, the assessee is in appeal. The LD. AR made a prayer that the issue may be restored as the action of the department amounts to cherry picking i. E selecting those comparables which suit the department. It was his submission that the TP study of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 18.03%. It was submitted that the arguments against the filters applied by the TPO have been rejected by the DRP and the TPO s action has been upheld. It was also submitted that no arguments were ever advanced before the DRP that cherry picking has been done and to now argued that cherry picking has been done without any facts it was submitted should not be accepted. It was his vehement stand that if the issue has to go back then the assessee needs to first provide a justification for the request. It was his stand that remand merely for the asking should not be permitted. It was his submission that such an act would set a wrong precedent. It was submitted that the assessee at this belated stage is coming with the request and has not cared to support the same with any additional evidences or material so as to demonstrate that the results would vary after the fresh search is done. Merely to satisfy the request of the assessee, it was submitted matter should not be remanded. 8.7. We have heard the rival submissions and perused the material available on record including the order of the Co-ordinate Bench in assessee s case for the immediately preceding assessment year. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Services, BPO/IT Enabled Services. The annual report of the company has been perused. The entire income of the company is from software exports. It also passes all the appropriate filters. This can be used as a comparable. 2. Aricent Technologies (Holdings) Ltd. Fails on quantitative screens This comparable has been rejected on account of the NFA/Sales filter. It has already been discussed that this filter is not an appropriate one. This company is a software developer and passes all appropriate filters. This shall be used as a comparable. 3. Cybermate Infotek Ltd. The company is into diversified activities- involved in the provision of business and technology consulting, custom software development, maintenance, application services, product engineering, re- engineering etc. The annual report of this company has been perused. The entire income of the company is from a single segment of computer software. It also passes all relevant filters. This shall be used as a comparable. 4. Infosys Informat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egment shall be used as a comparable. 11. Tata Elxsi Ltd. Fails on quantitative screens The filter on which this company has been rejected. The company passes all filters. This shall be used as a comparable. 12. Zenith Infotech Ltd. Fails on quantitative screens The NFA/Sales filter on which the company has been rejected is not appropriate. The company passes all relevant filters. This shall be used as a comparable. 8.7.1. It is seen that as a result of this, the TPO selected these 15 comparables (12+3) and show-caused the assessee why on the basis of the average OP/TC percentage of 30.84% ALP adjustment of ₹ 70,23,54,339/- be not made. 8.7.2. It is seen that the reply to the same was made by the assessee vide letter dated 19.10.2011 which has been considered and found discussed in detail in para 6.2, 6.3 to 6.3.5, 6.4 to 6.4.4, 6.5 to 6.5.13, 7 to 7.1.5 at pages 25 to 45 by the TPO. This has resulted in reducing the average OP/TC percentage from 30.84% which was initially communicated to 26.42% resulting in proposin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidently the material relied upon by the TPO was not confronted to the assessee cannot form the basis that following years also warrant a remand. It is also seen that no effort has been made on behalf of the assessee to demonstrate that the results would vary if a fresh search is done as no effort to move fresh evidence has been made on behalf of the assessee despite the fact that the hearings took place on 20.02.2013, 14.03.2013 and concluded on 19.03.2013. Thereafter, it is seen that on 26.03.2013, the appeal was fixed for clarification and the Ld. AR was required to give justification in support of the claim as in para 4.2, it had been alleged that the TPO has resorted to cherry picking . The parties were heard on 04.04.2013 and 11.04.2013 and finally the hearing was concluded on 03.05.2013. Despite more than adequate time being repeatedly granted to the assessee despite that nothing has been placed on record to show that the results would vary and remand in the interests of justice is warranted on facts. In the absence of any such submission and evidence to show that the assessee has been prejudiced as the only arguments made are that the TPO has not confronted the assessee w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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