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TMI Blog2018 (1) TMI 1158X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income Tax Rules require the said exercise to be undertaken with reference to inter alia “the functions performed/taken into account, assets ought to be employed and the risks assumed” by the tested party and the comparable. A specific characteristic of the property transferred or services provided in both the controlled and uncontrolled transactions had to be taken into consideration. It is not understood why the ITAT did not undertake such exercise regarding the correctness of the inclusion and exclusion of comparables. - matter restored before ITAT - Consequently, the Court answers the question framed in the affirmative, that is, in favour of the Assessee and against the Revenue - I. T. A. No. 505 of 2017 - - - Dated:- 18-9-2017 - S. Muralidhar And Prathiba M. Singh JJ. For the Appellant : Mr.Ajay Vohra, Sr.Advocate with Mr.Aniket D.Agrawal, Mr.Neeraj Jain, Advocates. For the Respondent : Mr.Rahul Chaudhary, Sr.Standing Counsel, Mr.Sanjay Kumar, Jr.Standing Counsel. ORDER C.M.No.24210/2017 (delay in re-filing) 1. For the reasons explained in the application, delay in re-filing is condoned. The application is disposed of. ITA No.505/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arket information on potential buyers, visiting distributors, direct customers and strategic partners, liaising and meeting with existing and potential customers/distributors, follow up until delivery in respect of the orders which are directly placed by distributors and other customers to its AEs, etc. In lieu of these services, the Assessee is reimbursed all the costs incurred by it along with a mark up of 5%. 6. It is further stated that during the financial year relevant to AY 2008-09, the Assessee entered into following international transactions with its AE: S. No. International Transactions Amount (Rs.) Method Applied 1. Import of Rough Ophthalmic Blanks 22,85,05,530 TNMM 2. Provision of Agency Services 81,97,038 3. Provision of Market Support Services 6,04,00,045 TNMM 4. Reimbursement of actual expenses 32,04,022 - 7. In i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( ALP ) of the international transaction undertaken by the Assessee during the relevant year. The TPO segregated the agency services from the distribution segment and clubbed them with the marketing support services for the purposes of the benchmarking analysis applying TNMM. 11. The TPO determined the income from the agency services by allocating common expenses aggregating to ₹ 2,08,04,010/- relating to the distribution sales and imputed sales to earn agency commission in the ratio of 52.25% and 47.75%. The TPO picked up ten comparables and worked out the upward TP adjustment of ₹ 1,32,99,572 as under: Particulars Amount (Rs.) Total Cost of provision of services under Agency Segment and Marketing Support segment. 6,70,62,443 Arm s length margin @ 22.12% 1,48,34,212 Arm s length price of aggregated international transactions (A) 8,18,96,655 Price charged by appellant (B) 6,85,97,083 Transfer Pricing Adjustment (A - B) 1,32,99,572 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by observing that adjudication of the said issue would be futile. It directed the TPO to undertake a fresh TP study analysis to benchmark the international transaction undertaken by the Assessee after giving the Assessee an adequate opportunity of being heard. 16. The Assessee thereafter filed a Miscellaneous Application dated 28th March, 2017 before the ITAT under Section 254 (2) of the Act. The said application is stated to be still pending before the ITAT. 17. Mr. Ajay Vohra, the learned Senior Counsel appearing for the Assessee submitted that the ITAT ought not to have remanded the matter to the TPO for undertaking the TP analysis afresh. He pointed out that merely because the computation of operation margin of the Assessee as tested party was to be reworked by the TPO in terms of the ITAT s finding as regards the allocation of expenses, it did not preclude the ITAT from examining whether the selection of comparables was correct. He submitted that for the purposes of the benchmarking analysis, comparable companies have to be selected on the basis of the functions performed, assets acquired and risks assumed ( FAR analysis) vis-a-vis the tested party. With the Assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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