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TMI Blog2020 (1) TMI 1031X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A)'] erred in confirming the addition of Rs. 2,16,03,797 made by the Assessing Officer ('Assessing Officer') in relation to the arm's length price of the Appellant's international transaction as follows: 1. On the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) ['CIT(A)'] erred in confirming the addition of Rs. 1,91,90,781 in relation to determination of Arm's Length Price relating to the Appellant's international transaction of engineering design services; 2. On the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the addition of Rs. 17,15,967 in relation to determination f Arm's Length Price relating to the Appellant's international transaction of Reimbursement of Management fee expenses; 3. On the facets and circumstances of the case and in law, the learned CIT(A) erred in confirming the addition of Rs. 6,97,049 in relation to determination of Arm's Length Price relating to the Appellant's international transaction of Reimbursement of Insurance Premium; 4. The learned Assessing Officer be directed to grant (+/-) 5% benefit as available under proviso to Section 92C(2) of the Act. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Canada 100 Rolta Deutschland GmbH Germany 100 "10.3. The financial statement of Rolta India Ltd was for the entire group which was used as comparable of the assessee company. In our considered view the consolidated financial statements cannot be compared with the assessee before us. It is because the consolidated financial statement of Rolta India Ltd. also contain the information/financial result of the entire group. As such, the provisions of the Act requires that only the Indian company of Rolta can be considered as 1 of the comparable for working out the ALP of the assessee. The consolidated financial statements of Rolta are placed on page no 603 of the paper book. 10.4. In holding so we also draw support and guidance from the order of Hon'ble Mumbai tribunal in the case of Capgemini India Private Limited, ITA no 7861/MUM/2011 dated 28-02-2013 wherein it was held as under: "5.3.3 We first deal with the pleas raised by the ld. Sr. Counsel for using consolidated results for the purpose of comparison of margins. The ld. CIT-DR has pointed out that the four comparables having substantial related party transactions i.e., CG-VAK, Mascon Global Limited, Mastek Ltd. a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 of the comparable, we do not find any reason to adjudicate the issue for the inclusion of Geometric. Hence, the ground of appeal of the assessee is partly allowed." 3.4. In view of the above, we respectfully following the same, we direct the TPO not consider Rolta India Ltd. as the comparable for determining the ALP. 2. Power soft to be rejected At the outset, we note that the learned DRP in the assessment year 2007- 08 has excluded this company from the list of comparable by observing as under: "37. In the case of the objection pertaining to Engineering Design Services, the Panel decided to consider the following comparables as given in the TPO's selection: Sr.No. Company name OP/TC 1. Ace Software Exports Ltd. 16.32% 2. KLG Systel Ltd. 22.25% 3. Powersoft Global Solutions Ltd. 15.35% 4. Rolta India Ltd. 38.79% Mean 23.18% In the above set of comparables, the assessee states that Powersoft Global Solutions was a software development and not a service company using CAD/CAM. The Panel decided to exclude this from the set. Accordingly, the Panel decided to have the following companies in the set: 1. Ace Software Exports Ltd. 16.32% 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion with the AE. As such there is no power available to the TPO to make the ad hoc disallowance while computing the income under the head business and profession. In this regard we find support and guidance from the judgment of Hon'ble Mumbai Tribunal in case DCIT Vs. Flakt (India) Ltd. reported in 76 taxmann.com 209 where in it was held as under: "Another aspect which emerges from the order of the TPO is as follows. After considering the factual matrix, the TPO has proceeded to determine the arm's length price for the service charges at 10% of the expenses recovered. Ostensibly, the income arising from an international transaction is liable to be computed, having regard to the arm's length price as mandated in section 92(1) of the Act. Section 92C prescribes the manner of determination of the arm's length price and sub-section (1) thereof specifically lays down various methods by which the determination of arm's length price has to be made. It is quite clear that there is no adhocism permissible in the manner of computation of arm's length price of an international transaction, whereas the action of the Transfer Pricing Officer in considering the arm's le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rival contentions and perused the materials available on record. From the preceding discussion we note that the TPO has made the disallowance of the insurance expenses claimed by the assessee for the reasons as detailed under: i. The payment of insurance premium to a foreign company is prohibited under the insurance Act. ii. The assessee has derived no benefit out of this expense. 8.1. Admittedly, there is no power available to the TPO to verify the allowability of any business expense. As such the role of the TPO is limited to the extent of determining the arm length price of the transaction carried out by the assessee with the AE. However in the case on hand, the TPO without determining the arm length price of the insurance expenses claimed by the assessee has disallowed such expenses by observing that the same is prohibited under the insurance that. Admittedly, such expenses are prohibited under the insurance Act. But the controversy arises whether such expenses can be disallowed by the TPO in the given facts and circumstances. In this regard we note that the role of the TPO is to determine the arm length price of the transactions of insurance premium as the impugned pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made a specific submission about the benefit of adjustment of + 5% to be given while determining the Arms Length Price, the ld. counsel for the assessee has not been point out as to how and in what manner, the order of ld. CIT(A) in rejecting this claim of the assessee is improper and unjustified. Since both the parties have not been able to controvert the findings recorded by the ld CIT(A) or point out any material to enable us to take a view other than view taken by the ld. CIT(A), we are inclined to uphold the order of ld. CIT(A) on the point of determination of Arms Length Price in respect of the transactions entered into by the assessee with its associate enterprises, namely, RCS Centre Corp. Therefore, the order of ld. CIT(A) is upheld, and the grounds raised by the assessee as well as by the revenue on this issue are rejected. In view of the above we do not any reason to interfere in the finding of the DRP and accordingly uphold the order of the AO. Hence, the ground of appeal of the assessee is dismissed. 9.2. In view of the above, we respectfully following the order as discussed above, we are inclined to confirm the order of the Ld. CIT(A). Hence, the ground of appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r relevant to the previous year in which the industrial undertaking begins to manufacture or produce articles or things. The term "manufacture" includes processing or assembling or recording of programmes on any disc, tape, perforated media or other information storage device. The above tax holiday was not available to a hundred per cent export-oriented undertaking. Such undertakings were eligible only for deduction out of their export profits under section 80HHC of the Income-tax With a view to providing further incentive for earning foreign exchange, a new section 10B has been inserted by the Act, so as to secure that the income of a hundred per cent, export-oriented undertaking shall be exempt from tax for a period of five consecutive assessment year falling within the block of eight assessment years. The exemption provided under the new section is similar to the one provided to industrial undertakings operating in free trade zones. The exemption under the new provisions will be subject to the following conditions:- (i) That the unit manufactures or produces any articles or things. The term "manufacture" will include any processing or assembling or recording of programmes on d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antial value, as also may be increase the turnover or efficiency, nonetheless the act subscribes that the undertaking must not be formed by the splitting up or the reconstruction of a business already in existence. The Act also subscribes that the profits shall not to be included in the total income in respect of the prescribed consecutive assessment years beginning with the assessment years undertaking begins to manufacture an article. Therefore, the initial year is the year to establish the eligibility of the claim. Even the Ahmedabad Benches are also consistently subscribing this view as held in the case of Gateway Technolabs Pvt.Ltd., ITAT "C" Bench Ahmedabad (in ITA No.2473 & 2519/Ahd/2006 - AY 2003- 04) order dated 4.9.2009. 6.1. As far as the question of alleged purchase of the machinery in question is concerned, there are few facts which indicate that the AO has wrongly held that it was an outright purchase by the Chennai Unit. In this regard, the first appellate authority has given a finding of fact that it was not evident from the records that the transaction relating to the machinery constituted outright sale. Likewise, as also simultaneously in the case of M/s.Sakhi R ..... X X X X Extracts X X X X X X X X Extracts X X X X
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