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TMI Blog2013 (12) TMI 1661X X X X Extracts X X X X X X X X Extracts X X X X ..... he international transactions pertaining to provision of material handling solutions; Rejecting the aggregation of international transactions entered into by the Appellant pertaining to manufacturing activity 3. erred in rejecting the aggregation approach adopted by the Appellant in its Transfer pricing study for benchmarking the international transactions pertaining to provision of material handling solutions; Non inclusion of services income for the purpose of computing the Appellant's margin for manufacturing activity 4. erred in not including services income for the purpose of computing the Appellant's margin from manufacturing activity while computing arm's length price; Non grant of adjustment 5. erred in not providing adjustment on account of high import duty incurred for import of raw materials, components and spares, while benchmarking the impugned transaction for computing arm's length price; 6. erred in not granting working capital adjustment in respect of one of the comparable i.e. Elecon Engineering Company Limited, while determining the working capital adjusted weighted average operating profit margin of comparable companies disreg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... general in nature. He also did not press grounds of appeal No. 8, 9 10. Ld. DR has no objection for the same. Therefore, the grounds of appeal No. 1, 2, 3, 8, 9 and 10 are dismissed as not pressed. 4. So far as ground of appeal No. 4 is concerned, we have heard the rival arguments made by both the sides. We find similar issue had arisen before the Tribunal in assessee's own case for the immediately preceding assessment year i.e. 2007-08. We find the Tribunal vide Demag Cranes Components (India) (P.) Ltd. v. Dy. CIT [2013] 56 SOT 187 (Pune - Trib.) has discussed the issue and restored the matter to the file of the AO with certain directions by observing as under: '30. We have carefully considered the rival submissions. Section 92B of the Act provides the meaning of expression international transaction as a transaction between two or more associated enterprises. Rule 10A(d) of the Rules explains the meaning of the expression transaction for the purposes of computation of ALP as to include a number of closely linked transactions. Rule 10B of the Rules prescribes the manner in which the ALP in relation to an international transaction is to be determined by follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for such transactions by adopting the most appropriate method. In other words, in a given case where a number of closely linked transactions are sought to be aggregated for the purposes of bench marking with comparable uncontrolled transactions, such an approach can be said to be well established in the transfer pricing regulation having regard to Rule 10A(d) of the Rules. Though it is not feasible to define the parameters in a water tight compartment as to what transactions can be considered as 'closely linked', since the same would depend on facts and circumstances of each case. So however, as per an example noted by the Institute of Chartered Accountants of India (in short the 'ICAI') in its Guidance Notes on transfer pricing in para 13.7, it is stated that two or more transactions can be said to be 'closely linked', if they emanate from a common source, being an order or contract or an agreement or an arrangement, and the nature, characteristic and terms of such transactions substantially flow from the said common source. The following extract from the said Guidance Notes is worthy of notice :- 13.7 The factors referred to above are to be applied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation services, etc. Though the assessee raises different invoices for supply of equipments and separately for erection and commissioning charges, however, it is evident that the negotiations for the same are carried on at one go. In fact, at the time of hearing, it was specifically queried from the learned counsel as to whether the assessee is undertaking installation/commissioning activities independent of its own-supplied material handling equipments. It was clarified that the servicing and commissioning charges are earned only in relation to services performed for own-supplied manufacture/assembled material handling equipments. The aforesaid factual assertion is not disputed. Factually, it is the activity of manufacturing/assembling of cranes etc. done by the assessee and sales thereof, which brings into play the activities of installation and commissioning of such products. Therefore, it is quite evident that such services are not independent but in-effect are as a result of manufacturing of material handling equipment undertaken by the assessee and as a they arise from a single negotiation with the customers, the source of all such transactions is also to be understood as com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for the TPO to say that the transactions are not 'closely linked' within the meaning of Rule 10A(d) of the Rules. Thus, the activity of installation and commissioning/engineering services is 'closely linked' with the manufacturing activity and deserves to be aggregated and construed as a single transaction for the purposes of determining the ALP as per the method adopted. 34. In view of the aforesaid discussion, in our opinion, the approach of the TPO, in out-rightly rejecting the aggregation of all the transactions itemized at 1 to 7 in para 7 is flawed having regard to the facts and circumstances of the case. Further, it is noticed from the tabulation in para 7 of this order, that the assessee is also rendering marketing services, technical know- how and professional services, etc., which have also been aggregated. For such activities no specific point has been made out by the assessee as to why they can be classified as 'closely linked' transactions for the purposes of Rule 10A(d) of the Rules. Considering the entirety of the facts and circumstances, we are of the opinion that the issue be revisited by the AO/TPO in the light of our aforesaid discu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the import cost factor and eliminate the difference, If any. However, the TPO/AO/DRP shall see to it that the difference in question is 'likely to materially affect' the price/profit in the open market as envisaged in sub rule (3) of Rule 10B of the Income-tax Rules 1962. Accordingly, ground 4(b) is allowed pro tanto. 24. Following the aforesaid precedent, facts being similar in this year, we deem it fit and proper to restore the matter back to the file of the Assessing Officer who shall adjudicate assessee's plea in the light of directions of the Tribunal contained in its order dated 4-1-2012 (supra). Needless to say, the Assessing Officer shall allow the assessee a reasonable opportunity to put forth material and submissions in support of its stand and only thereafter the Assessing Officer shall pass an order afresh on the above aspect in accordance with law. Thus, on this Ground, assessee succeeds for statistical purposes.' 7. Respectfully following the decision of the Tribunal in assessee's own case, we restore the issue to the file of the AO with a direction to decide the issue afresh and in accordance with the law in the light of the direction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed or in case these details are not available, no adjustment should be made based on a company as a whole as the adjustment computed will not be accurate and reliability will not be enhanced. He accordingly rejected the adjustments computed for Elecon Engineering Company holding the same as not appropriate. Having held so, the AO considered Elecon Engineering Co. Ltd. for computing the adjusted PLI as per page No. 10 of the assessment order. In view of the above and respectfully following the decision of the Mumbai bench of the Tribunal in the case of DHL Express Ltd. (supra), we direct the AO to remove Elecon Engineering Co. from the list of comparables and re-compute the PLI. We hold and direct accordingly. This ground of the assessee is accordingly, allowed for statistical purposes. 11. So far as ground No. 7 is concerned, we find an identical issue had come up before the Tribunal in assessee's own case for the immediately preceding assessment year. We find the Tribunal has discussed the issue from paras 7 to 15 of the order and following the decision of the Tribunal in assessee's own case for A.Y. 2006-07 allowed the claim of the assessee by observing as under: & ..... X X X X Extracts X X X X X X X X Extracts X X X X
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