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TMI Blog2018 (4) TMI 1635X X X X Extracts X X X X X X X X Extracts X X X X ..... nience. 3. First, we shall take up the appeal in ITA No.359/PUN/2016, relating to assessment year 2011-12. The assessee has raised the following grounds of appeal:- The grounds stated hereunder are independent of, and without prejudice to one another: 1. On the facts and in the circumstances of the case, and in law, the Ld Dispute Resolution Panel ('DRP') and the Ld Assessing Officer ('AO'), following the directions of Ld DRP, erred in confirming the addition of Rs. 10,85,12,147/- to the total income of the Appellant on account of the transfer pricing ('TP') adjustment under Section 92CA(3) of the Income-tax Act, 1961 ('the Act') by rejecting the TP analysis conducted by the Appellant. The Appellant prays that the TP analysis conducted by the Appellant be accepted and consequently the TP adjustment of Rs. 10,85,12,147/- be deleted. 2. On the facts and in the circumstances of the case, and in law, the Ld DRP and Ld AO, following the directions of the Ld DRP, erred in determining the arm's length price of the transaction pertaining to payment of fees for advisory and other services by the Appellant to its associated enterprises ('AEs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against Rs. 10,85,12,147/- determined by the assessee and thereby making TP adjustment to that extent. He further pointed out that the issue raised was whether any services were provided by associated enterprises to the assessee in order to justify the payment of fees for advisory and other services by the assessee to its associated enterprises. Further, the dispute was the application of most appropriate method to benchmark transactions, wherein the TPO had applied CUP method. The learned Authorized Representative for the assessee pointed out that the assessee had applied TNMM method while taking foreign entity as tested party and had compared the margins of assessee with mean margins of selected comparables. The learned Authorized Representative for the assessee in this regard, further submitted that some comparables may be applied and the matter may be verified by the Assessing Officer / TPO with respect to the margins of finally selected comparables. 5. The learned Departmental Representative for the Revenue on the other hand, placed reliance on the orders of Assessing Officer / DRP. 6. We have heard the rival contentions and perused the record. The issue arising in the pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and other services by taking foreign associated enterprise as tested party. Further, the Assessing Officer is directed to benchmark the transactions by taking margins of foreign comparables which were selected by the assessee in earlier year and even in the year under consideration. However, to verify the claim of assessee that the margins shown by assessee and the mean margins shown by the comparables were within +/- 5% range, the Assessing Officer is directed to comply with the directions of Tribunal as in earlier year and compute arm's length price of international transactions. Reasonable opportunity of hearing shall be provided to the assessee by the TPO / Assessing Officer in this regard. We are referring to the observations of Tribunal in paras 17 to 30, however, for the sake of brevity, the same are not being reproduced. Thus, the grounds of appeal raised by the assessee in assessment year 2011-12 are allowed. 9. Now, coming to the appeal of assessee in ITA No.2847/PUN/2016, relating to assessment year 2012-13. 10. The learned Authorized Representative for the assessee pointed out that the ground of appeal No.1 raised by the assessee is general in nature. The ground o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellant and the comparable companies; viii. not granting risk adjustment for the differences in level of risk between the Appellant and the comparable companies; and ix. applying safe harbor rules for the purpose of margin computation of comparable companies 12. The learned Authorized Representative for the assessee pointed out that the issue raised vide ground of appeal No.3 is in respect of ITES segment, wherein the assessee was cost plus entity providing services with mark up of 10% on cost. The assessee had benchmarked the transactions using TNMM method. However, the TPO had applied additional filters for selection of comparable companies and accepted only two concerns from assessee's set of comparables selected. The learned Authorized Representative for the assessee pointed out that four new comparables were picked up by the TPO and the issue which is raised vide ground of appeal No.3 was against inclusion of two concerns Excel Infoways Ltd. and Universal Print Systems Ltd. He pointed out that the concern Excel Infoways Ltd. could not be selected as it was showing fluctuating margins in preceding years. It was further pointed out by the assessee that the annual report o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5% 15. The TPO thus, made an upward adjustment of Rs. 43,30,700/- in the segment of provision of ITES services. The DRP rejected the contention of assessee on inclusion / exclusion of certain comparables. However, it directed the TPO to adopt correct operating margins of comparable companies. Consequently, the mean margins of comparable companies was re-computed at 23.13% resulting in upward adjustment of Rs. 33,40,000/-. The assessee is in appeal against the said adjustment made in ITES segment. The plea of assessee during the course of hearing was that in case two concerns i.e. Excel Infoways Ltd. and Universal Print Systems Ltd. were excluded from the final list of comparables, then the margins shown by the assessee and mean margins of comparables were within +/- 5% range and no TP adjustment had to be made in the hands of assessee. 16. Coming to the first concern Excel Infoways Ltd., wherein the assessee points out that the said concern was not to be selected as comparable because of its fluctuating margins. The learned Authorized Representative for the assessee has filed tabulated details in this regard, wherein the margins of said concern being drastically dropped from 267. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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