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TMI Blog2017 (12) TMI 1050X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the contentions of Ld. CIT DR and remit this issue back to the file of Ld.TPO for proper verification of the comparables and applying filters as per law. - ITA No. 2380/Del/2010 - - - Dated:- 6-12-2017 - SHRI N . K . SAINI, ACCOUNTANT MEMBER AND SMT . BEENA A PILLAI, JUDICIAL MEMBER For The Appellant : Sh . Vikash Srivastava, Adv . For The Respondent : Sh . HK Choudhary, CIT, DR ORDER PER BEENA A PILLAI, JUDICIAL MEMBER The present appeal has been filed by revenue against order dated 25/03/10 passed by Ld.CIT(A)-XX, New Delhi for assessment year 2003-04 on following grounds of appeal: 1 . That on the facts and circumstances of the case and in law the Ld . CIT ( A ) erred in deleting the disallowance of Rs . 57,23,201 /- out of foreign travelling expenses made by the AO . 2 . That on the facts and circumstances of the case and in law the Ld . CIT ( A ) erred in restricting the comparables to 11 companies, and in rejecting the remaining 39 comparables selected by the TPO for the purpose of comparability analysis to determine the Arm s length price in assessee s case . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... International Transaction Method Value ( In Rs .) 1 . Purchase of phones and accessories RPM 6,49,91,49,131 2 . Purchase of telecom equipment TNMM 2,24,25,631 3 . Services rendered by NIC Hyderabad TNMM 9,41,99,186 4 . Services rendered by Net R D TNMM 12,58,01,989 In respect of the transaction referred at serial No. 1 and 2 in the above table, Ld.TPO accepted arm s length price determined by assessee. 2.2. However, he disputed transactions at serial No. 3 and 4, which were subjected to TP adjustments. It has further been submitted that there is no dispute regarding profile of assessee and method adopted for computing arm s length price. Assessee in the TP documentation carried out comparables search and determined arm s length price, using PLI as OP/TC in the set of comparable finalised which had average margin of 10%. Assessee was of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /del/2010 with CO No. 77/del/2010 and ITA No. 178/del/2010 vide order dated 31/10/14. Page 932-933 of volume 3 4.2. On the contrary Ld. CIT DR placed reliance upon the order passed by Ld. AO. 4.3. We have perused the submissions advanced by both the sides in the light of the records and decisions relied upon by Ld. Counsel in assessee s own case for various assessment years placed in the paper book before us. 4.4. Ld.AO disallowed 20% of total foreign travel expenses during the year under consideration. Ld.CIT(A) recorded that for assessment year 2000-01 and 2001-02 the disallowance was restricted to 10% of the total expenses incurred for foreign travel, against which Revenue preferred appeal to this Tribunal. This Tribunal observed as under: 15 . We have heard both the parties and perused record placed on record . Apropos ground no . 1, we are of the view that assessee had filed sufficient evidence in the form of foreign travel expenses incurred by the assessee on its employees who went abroad to carry out business activities of the assessee in respect of various services relatable to software, maintenance etc . Apa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of law arises . 4.5. Ld. Counsel submitted that, for the year under consideration, there has been no change in factual position in so far as foreign travel expenses are concerned. He submitted that for the year under consideration foreign travel expenses incurred were ₹ 2,86,16,007/-. Further Ld.CIT(A) categorically observed that these expenses have been incurred in accordance with international travel policy of Nokia group, which regulates and facilitates the movement of personnel of the assessee across international locations, and there is no expenses which could be termed as not incurred for purposes of assessee company. From the submissions made by assessee before the authorities below, it appears that assessee has filed all the relevant details in respect of travelers and their status of employment with Nokia. 4.6. We therefore do not find any reason to interfere with the consistent approach followed by Ld.CIT(A) which is supported by various orders of this Tribunal for various assessment years and which have been affirmed by Hon ble jurisdictional High Court in appeal filed for Assessment Year 2000-2001 and 2001-02. 4.7. Accordingly this ground raised by r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upper sales. He submitted that Ld. CIT (A) has merely followed the order of his predecessor for assessment year 2002-03 without remanding the issue back to ld.TPO. He submitted that Ld. CIT (A) while changing the filter did not give an opportunity to ld.TPO. 5.6. He submitted that while applying RPT filter Ld. CIT (A) has not analysed the financial data of comparables vis-a-vis assessee, for the year under consideration and has merely blindly followed the decision of his predecessor for assessment year 2002-03. 5.7. Ld.CIT.DR vehemently argued that assessee had not even chose identical comparables for assessment year 2002-03 in order to consider the facts similarly. He submitted that Ld.CIT (A) while deleting the comparables for assessment year 2002-03 had remanded the issue to ld.TPO for his comments. Ld. CIT DR submitted that no proper opportunity was granted by Ld. CIT (A) while excluding companies from the list of comparables. He submitted that this ground may be set aside to ld.TPO for proper verification of facts as per law. 5.8. On the contrary Ld.AR submitted that identical issue decided for assessment year 2002-03 has been upheld by Hon ble High Court, which is pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessment Year 2002-03, in respect of turnover filter that has been applied to the comparables which is reproduced hereunder: 39 . After considering the rival submissions and perusing the relevant material on record, we find that the assessee s turnover under this segment is to the tune of Rs . 9 . 72 crores . The TPO excluded the companies with the turnover of less than Rs . 5 crore without applying any upper limit of the turnover . The preliminary question which looms large before us is whether the application of this filter is correct? In this regard, it is relevant to note that the computation of arm s length price under the Indian transfer pricing provisions is embodies in section 92C of the Act . Sub - section ( 1 ) of this section provides that the arm s length price in relation to an international transaction shall be determined by any of the given methods, being the most appropriate method, having regard to certain factors . Proviso to sub section ( 2 ) , which assumes significance for the present purpose, states that : where more than one price is determined by the most appropriate meth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure on advertisement and R D etc . The higher turnover was only one of the criterion and not the sole criteria for exclusion of this company . In view of the above discussion, we hold in principle that no potentially comparable company can be expelled from the list of comparables simply for the reason of high or low turnover . 41 . Adverting to the facts of the instant case, it is seen that the assessee s turnover under this segment amounted to less than Rs . 10 crore . The TPO has applied the turnover filter by setting a lower limit of turnover at Rs . 5 crore without setting any upper ceiling of turnover . We fail to comprehend any legally sustainable reason for applying the filter setting a lower limit of turnover at around half of assessee s turnover and leaving the upper limit uncapped . It is trite that law does not permit a person to both approbate and reprobate . This proposition has sanction of the Hon ble Supreme Court in RN Gosain vs Yashpal Dhir ( 1992 ) 4 SCC 683 . Under this rule, a person cannot be permitted to blow hot and cold in the same breath . As TPO has himself appli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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