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TMI Blog2017 (11) TMI 385X X X X Extracts X X X X X X X X Extracts X X X X ..... learned CIT-(A) that the additional revenue in question needs to be included in for computing PLI of the year under consideration. However, whether the additional revenue fee received pertains to IT enabled services i.e. relevant international transaction, has not been examined by the lower authorities, thus, we feel it appropriate to restore the issue to the file of the AO/TPO for verifying the facts and decide the issue in accordance with law. The assessee shall be afforded adequate opportunity of being heard. Accordingly, the ground of the appeal is allowed for statistical purposes. - ITA No. 5228/Del/2014 - - - Dated:- 6-11-2017 - SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. O.P. KANT, ACCOUNTANT MEMBER For The Appellant : None For The Respondent : Sh. H.K. Choudhary, CIT(DR) Sh. Sanjay Kumar Yadav, Sr.DR ORDER PER O.P. KANT, A.M.: This appeal has been filed by the Revenue against the order dated 21/07/2014 of the Commissioner of Income-tax (Appeals)-XXIX, New Delhi [in short the CIT-(A) ] for assessment year 2005-06 raising following grounds: 1. On the facts and in the circumstances of the case, Ld. CIT(A) erred in directing the TPO to delet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a revised computation of income, declaring total income of ₹ 1,02,56,880/-. In the revised computation, the assessee declared income under the head Profit and Gains of Business or Profession at nil after claiming deduction of ₹ 13,76,14,091/- under section 10A of the Act. Income under the head Income from other sources was declared at ₹ 1,03,88,880/- and after claiming deduction under section 80G of the Act, amounting to ₹ 1,32,000/- total taxable income was arrived at ₹ 1,02,56,880/-. In assessment proceeding, the Assessing Officer noticed following international transactions with its AEs: S. No. Description of the transactions Amount (Rs.) 1. Provision of IT Enabled back services to the AEs 946,818,348 2. Receipt of Call Centre Support Services 102,575,273 3. Receipt of Technical Counseltancy Services 18,815,642 4. Cost Recharges 21,084,439 3.1 The Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f comparable selected by the assessee in transfer pricing study for the year under consideration. Using this methodology, the learned TPO arrived at an average OP/TC margin at 14.77% for the revised set of comparables and proceeded to make TP adjustment amounting to ₹ 5,60,42,063/-. 3.4 After following the procedure laid down in the Act, the Assessing Officer passed the final assessment order on 19/12/2008 assessing the total income at ₹ 6,62,98,943/-. 3.5 Aggrieved, the assessee filed appeal before the Ld. CIT-(A), who partly allowed the appeal of the assessee. Aggrieved, the Revenue is in appeal before the Tribunal raising the grounds as reproduced above. 4. The ground No. 1 relates to the direction of the learned CIT-(A) for excluding M/s Ultramine and Pigments Ltd. from the final set of comparables. 4.1 Before the learned CIT-(A), the assessee submitted that this company had extreme volatility/variations in its business performance. The assessee submitted profit analysis of the four years of comparable as under: Year FY 2005-06 FY 2004-05 FY 2003-04 FY 2002-03 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rating profit margins is sufficient ground to reject comparables for transfer pricing analysis? 4) Whether disallowances can be made under Section 36(1)(ii) when the bonus paid to shareholders is not in the exact proportion of their shareholding and there is no avoidance of taxes? 7. In para-44 of the decision, the Hon ble High Court concluded as under: 44. In light of the above findings, this Court concludes as follows: a. The mere fact that an entity makes high/extremely high profits/losses does not, ipso facto, lead to its exclusion from the list of comparables for the purposes of determination of ALP. In such circumstances, an enquiry under Rule 10B(3) ought to be carried out, to determine as to whether the material differences between the assessee and the said entity can be eliminated. Unless such differences cannot be eliminated, the entity should be included as a comparable. b. While determining the comparability of transactions, multiple year data can only be included in the manner provided in Rule ITA 417/2014 Page 52 10B(4). As a general rule, it is not open to the assessee to rely upon previous year ‟ s data. c. As regards Khandw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of the TPO is that this additional revenue has been offered for taxation by the appellant for FY 2006-07 and return for AY 2005- 06 has not been revised by the appellant. 38.2 I find force in contention of the appellant that additional revenue received during FY 2006-07 pertains to period under consideration and it has been mentioned so in financials of FY 2006- 07. The appellant did not consider it while computing profit margin for FY 2006-07. By following matching principle, this additional revenue needs to be included for computing PLI of FY under consideration. This approach has been accepted by DRP for the subsequent AY under similar facts and circumstances. 10. Before us, the Ld. Sr. DR submitted that it was not clear, whether the re-negotiated service fee was for provision of the IT enabled backoffice services, or it included other service fee receipts. i.e. call centre support service and receipt of technical consultancy services provided by the assessee. He submitted that this issue has not been discussed either by the Ld. CIT-(A) or by the TPO and therefore, the issue need to be examined again at the level of the TPO. 11. We have heard the submissi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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