9911796707
TMI Blog2016 (8) TMI 1081X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant has challenged correctness of the order dated 30th January 2016 passed by the Assistant Commissioner of Income Tax Circle 9(2) New Delhi, under section 143(3) r.w.s 144C of the Income Tax Act, 1961, for the assessment year 2011-12/ 2. Grievances raised by the appellant, so far as transfer pricing issues are concerned, are as follows: 1. General 1.1 The learned Assistant Commissioner of Income Tax, Circle-9(2), New Delhi ( the Assessing Officer or the Ld. AO ) and Learned TPO pursuant to directions of Hon'ble Dispute Resolution Panel ('Hon'ble DRP'), has erred on facts and circumstances of the case and in law in completing the present assessment at an income of ₹ 1,39,59,460 as against the returned income of Rs.(-) 4,05,01,773 is bad in law. 1 2 That, the Learned Deputy Commissioner of Income Tax, Transfer Pricing Officer -1(2)(1) (hereinafter referred as 'learned TPO')/Hon'ble DRP has grossly erred in making/upholding an adjustment of ₹ 5,41,00.671 in respect of disallowance of capacity adjustment and payment of royalty and markup in respect of management charges to AE. 2. Rejection of the economic analysi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd royalty on the basis of incorrect presumptions and accordingly made an adjustment of INR 30,025,734 to the total income of the Assessee. 4.5 The Ld. TPO/ Hon'ble DRP erred in misinterpreting/ misconstrued the facts with respect to the international transaction relating to payment of management fee on the basis of incorrect presumptions and made an adjustment of INR 1,16,186 to the total income of the Assessee. 3. As the hearing progressed and as we narrowed down to the precise issues requiring our adjudication, learned representatives fairly agreed that the short issues that we are required to decide, however, is (a) whether or not the Assessing Officer was justified in declining capacity utilization adjustment, in respect of computation of arm s length price on sale of finished goods, components and spares; and (b) whether or not the Assessing Officer was justified in making an arm s length price adjustment of ₹ 8,77,31,148 by rejecting the assessee s determination of ALP of these services under the TNMM, and by adopting the arm s length price of the same services, under CUP method, at NIL value. 4. As far as the first issue is concerned, the relevant ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ALP is being determined for the raw material rather than sales. It is only when purchases are being made from the AEs and the revenues are being generated from the unrelated parties that such an adjustment, even theoretically, can come into play. In view of these discussions, and noting that AE should have provided some price support to the assessee , the TPO rejected the capacity underutilization adjustment. The assessee did raise an objection before DRP but without any success. The DRP noted that the TPO has given valid reasons for not accepting the assessee s claim and that the assessee has failed to controvert the reasons given by the TPO for rejecting the assessee s claim for capacity adjustment . In any event, as the DRP noted, the adjustment is required to be made in the comparables rather than the tested party. The ALP adjustments, accordingly, were made in respect of sale of finished goods for ₹ 1,51,68,845 and in respect of sale of components and spares for ₹ 87,90,105 Aggrieved by the stand so taken by the DRP, the assessee is in appeal before us. 5. Having heard the rival contentions and having perused the material on record, we are of the conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er is required to be remitted to the file of the AO for fresh quantification of the adjustment figure by making the necessary changes in the figures of comparables rather than the tested party. The matter stands restored to the assessment stage, with the above observations. 6. As for the second issue, that was a matter taken up at the DRP only inasmuch as an enhancement was made by the DRP in this regard. During the course of the proceedings before DRP, it was noticed that in the immediately preceding assessment year, i.e. 2010-11, the TPO had made an ALP adjustment of ₹ 29,65,700 in respect of management fees and of ₹ 8,47,65,448 in respect of royalty and licence fees, and these ALPs were confirmed by the DRP. The DRP required the assessee to show cause as to why similar ALP adjustment not be made for this assessment year as well, as the relevant facts and circumstances are similar. It was in this backdrop, and after rejecting the submissions against the enhancement, that the DRP directed the Assessing Officer to make similar (arm s length price) adjustment towards royalty and management fees as has been upheld by the DRP in 2010-11 . When the matter thus travelled ..... X X X X Extracts X X X X X X X X Extracts X X X X
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