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TMI Blog2009 (11) TMI 918X X X X Extracts X X X X X X X X Extracts X X X X ..... t these companies were rejected for the selection because they either had insufficient description information, or significant related party transaction or had exceptional year of operation. The reasons were not considered by the AO and he rejected the submission in a summary manner. Assessee's contention that selection of these companies by the AO amounts to Cherry Picking and hence not justified caries considerable cogency. AO also did not elaborately analyse the results of these companies, but merely stated that at least 3 other companies rejected by the assessee in its document had shown better margin than the assessee company. Hence he made the adjustment of 5%. Now the assessee's submission in this regard is that the averag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Form3CB. S.No. International Transaction Method Value in Rs. 1. Provision of Representative and Marketing TNMM 6,19,26,399/- 2. Reimbursement of Mobile phone expenses by Toshiba Japan Not bench marked 70,963/- 3.1 The AO asked the company to produce its transfer pricing documentation on the basis of which it had justified its arms length price. 3.2 The assessee responded with the documents which showed that it had declared the net margin of 15.97% on the service charges received from Toshiba Japan. The assessee comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hrough the order of the AO. The AO while rejecting the operating margins declared by the appellant has not utilized the full data provided by the applicant for making the comparison. He has considered only the few companies for comparison which had shown better results. In an arbitrary manner, he has made an adjustment of 5% in the operating margin declared by the appellant and in consequence has made an addition of ₹ 30,96,320/-. I do not find any merit in the 5% adjustments made by the AO in the operating margins. He has not given any reasons for such arbitrary adjustment. The operating margins shown by the appellant are therefore accepted. The addition made by the AO to the tune of ₹ 30,96,320/- is therefore deleted. 5. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ld. Counsel submitted that AO has erred in fact by concluding that average mean of these four PSUs are greater than of the assessee. The average mean of the 4 companies selected by the AO with 13.62% which is lower than the operating margin of independent company and the operating margin was 15.97%. Hence, it was contended that the AO has not provided any reasonable ground in accordance with section 92(3) for disregarding the analysis undertaken by the assessee. It has further been contended that benefit of provisio of section 92(c) was not provided to the assessee. Ld. Counsel of the assessee further placed reliance upon decision of ITAT, 'H' Bench in Mentor Graphics (Noida) (P). Ltd. v. Dy. CIT [2007] 109 ITD 101 (Delhi) 6.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the existing provision of Act contained in the proviso of section 92C allows a variation of 5%. The concerned provisio of reads as under: Provided that where more than one price is determined by the most appropriate method, the arm's length price shall be taken to be arithmetical mean of such prices, or, at the option of the assessee, a price which may vary from the arithmetical mean by an amount not exceeding five per cent of such arithmetical mean. 7.1 In the background of above discussion, it is amply clear that the AO has arbitrarily made addition which is not in accordance with law. Hence, we do not find any infirmity or illegality in the order of the ld. CIT(A) in this regard. Hence, we hold the same. 8. In the resu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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