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TMI Blog2018 (9) TMI 786X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the said comparables. Similarly the entities selected by the TPO as comparables on specific grounds were rejected by the Ld. CIT(A) on the ground that their profit and loss account was not available. As rightly pointed out by the learned DR, the OP/OC of the said entities was worked out by the TPO in his order which was not possible without having their profit and loss account. This aspect, therefore, should have been confronted by the CIT(A) to the AO/TPO seeking their comments. CIT(A) in his impugned order has observed that the TPO did not provide an opportunity to the assessee to have the audited financial statements along with the FAR analysis of the comparables selected by him and there was thus a violation of principles of natural justice by the TPO. - Held that:- It is observed that the TPO has clearly mentioned in his impugned order that the financial statements of the said comparables were available in public domain and the assessee did not ask for the same specifically. CIT(A) at least should have remanded the matter to the AO/TPO for providing an opportunity to the assessee to have the audited financial statements along with the FAR analysis of the said comparables ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h its AE was claimed to be at arm s length by the assessee. 3. The TPO accepted the TNMM adopted by the assessee as the most appropriate method for determining the arm s length price of the international transactions entered into by the assessee with its AE. He also accepted OP/OC as the profit level indicator. He however worked out the OP/OC by making certain changes in the working furnished by the assessee at 11.27% instead of 12.78%. As regards the 5 entities selected as comparables in the TP study report, the Assessing Officer rejected after applying different criterias, 4 entities taken as comparables for the following reasons given in his order: SL No. Name of the comparable Remark 1. M/s. Cades Digitech (P) Ltd. The company has accumulated losses of ₹ 50.59 crore as at 31st of March 2010 which had significantly eroded its net worth. Consequently this creates a substantial doubt about the companies ability to continue as a going concern. Further the company was acquired by axis I T and T Ltd. with effect from 24th October, 2009. Furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apacities and to win global projects through timely, accurate and quality work. The company is an execution partner to Telecom Infrastructure Design Engineering Design house around the world. 3. Babcock Borsig Softtech (P) Ltd. BBSPL is a multi-disciplinary design and detailed engineering consultancy company based at Chennai. The company was originally a 100% subsidiary of IDEA (International Development and Engineering Associates Ltd.) and has reputed customers in India and abroad. BBSPL is also a 100% Export Oriented Unit and is registered with the Software Technology Park of India (STP). 4. Nauvata Engineering Pvt. Ltd. Nauvata Engineering Pvt. Ltd. is fully committed to being the leading provider of engineering design services. Since the average OP/OC of the above 4 entities selected as comparables by him was 34.73%, he worked out the arm s length price of the international transactions of the assessee-company with its AE at 4,68,42,025/- by applying the OP/OC of 34.73% to the operating cost of ₹ 3,47,67,331/- as against the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessee to enable it to verify the comparable figures with a right to file objection/ apply thereon, I have further noted that the Ld. TPO made certain incorrect assertions / statements in paragraph no. 6.1 of the order under section 92CA(3) of the Act that the appellant had not made any specific objection with regard to the companies selected by the Ld. TPO as the same was not provided to the appellant and also that the appellant had not asked for the same. During the course of hearing before me, the appellant collected and submitted the annual financial statements of aforesaid companies for the relevant financial year. I have noted that the Function-Asset-Risk (FAR) of Babcock Borsig Softech (P) Ltd. for the relevant financial year is completely different from the FAR of the appellant. I have further noted that the audited financial statements of Nauvata Engg. (P) Ltd. and ASE Structure and Designs (p) Ltd. for the relevant financial year do not disclose profit loss account statement without which it is not feasible to perform the FAR analysis and compute net profit indicator under the TNMM. I therefore reject Babcock Borsig Softech (P) Ltd., Nauvata Engg. (P) Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO on account of transfer pricing adjustment and the limited grievance of the revenue is that the Ld. CIT(A) while giving relief to the assessee on this issue did not ask for the remand report from the AO/TPO which was warranted in the facts and circumstances of the case. In this regard, he has invited our attention to the finding recorded by the Ld. CIT(A) in paragraph no 7 of his impugned order to the effect that TPO did not provide an opportunity to the assessee to have the audited financial statements along with the FAR analysis of the 3 entities namely M/s. Bapcock Pvt. Ltd., M/s. Nowata Engineering Pvt. Ltd. and M/s. AAC Structure and Design Pvt. Ltd. selected a comparables by the TPO. He has contended that this finding recorded by the Ld. CIT(A) on the basis of submissions made on behalf of the assessee before him was contrary to the finding recorded by the TPO in paragraph no 6.1 of his order wherein it was clearly mentioned by him that the financial statements of all the entities selected by him as comparables were available in the public domain and the assessee did not ask for the same. He has also pointed out from paragraph no 8 of the impugned order of the Ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssions made by the learned DR as well as the written submissions filed by the learned counsel for the assessee, we find merit in the contention of the learned DR that the Ld. CIT(A) ought to have given an opportunity to the AO/TPO to offer their comments on the various aspects of the matter by seeking remand report before accepting the submissions made on behalf of the assessee. We find that the Ld. CIT(A) has passed a very cryptic order and after extracting the submissions made on behalf of the assessee on page no 3 to 58 of his impugned order, he has given his conclusions hardly on one and half pages. As rightly pointed out by the learned DR, the comparables selected by the assessee were rejected by the TPO on specific grounds, but the Ld. CIT(A) has accepted the same only by stating that the FAR of the said entities was comparable to the FAR of the assessee-company. He has not given any reason whatsoever to come to that conclusion and has also not commented upon the specific grounds given by the TPO for rejecting the said comparables. Similarly the entities selected by the TPO as comparables on specific grounds were rejected by the Ld. CIT(A) on the ground that their profit and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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