9911796707
TMI Blog2018 (5) TMI 2026X X X X Extracts X X X X X X X X Extracts X X X X ..... ransfer Pricing Officer ('TPO') under Section 92CA(1) of the Act, without satisfying the conditions specified therein; TPO erred in characterizing the distribution fee paid by MSMD to its AE as royalty 4. erred in characterizing the distribution fee paid/ payable by the Appellant to its AES to be in the nature of royalty; Rejection of economic analysis undertaken by the Appellant in its transfer pricing study report 5. erred in not following the Appellant's own order for AY 2010-11 which was passed by the Hon'ble DRP accepting software distributors as appropriate comparable to benchmark the Appellant's international transactions inspite of there being no change in facts in AY 2011-12. 6. erred in rejecting the transfer pricing analysis undertaken by the Appellant under Section 92C of the Act and disregarding the fact that software distributors are appropriate comparables to benchmark MSMD's international transactions in the absence of any direct comparables. 7. erred in law and in facts, in rejecting the following companies from the Transfer Pricing Study for FY 2011-12 which are comparable to the Appellant: (i) Avance Technology Li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t granting economic adjustments on account of the differences in AE and Non AE segment; Short grant of tax deducted at source (TDS) 17. erred in short granting credit of taxes deducted at source of Rs. 2, 64, 14, 172 while computing the tax liability for the year; Interest under Sectioi 234D 18. erred in levying interest of Rs. 6, 56, 14, 648 under Section 234D of the Act; 19. without prejudice to the above, erred in computing interest under Section 234D at Rs. 6, 56, 14, 648 instead of Rs. 600, 30, 423; Penalty proceedings 20. erred in initiating penalty proceedings under Section 271(l)(c) of the Act. 3. The effective ground of appeal in this case is about the addition made by the assessing officer under the head 'transfer pricing adjustment'. The learned counsel of the assessee submitted that identical issue was considered by this tribunal in assessee's own case for assessment year 2011 -12. Vide order dated 26.07.2017, the tribunal had remitted the issue to the file of the transfer pricing officer. Learned counsel submitted that the facts are identical and the same ratio may be followed. However, the learned counsel of the assessee pointed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... derstanding, IT or an aggregate of similar IT.s, have to be evaluated, on a stand-alone basis and then compared with similar analysis undertaken on independent transactions. But, the ALP cannot be determined on preponderance of probabilities or based on objectives sought to be achieved in an enactment or in a policy guideline of the Government. Documentation and data has to be made available and comparability demonstrated before claiming that ALP adopted by the assessee is valid. Here, it will be useful to refer to the Income-tax Rules, 1962(Rules)dealing with TP adjustments. The sequitur of rule 10B(2) and (3) is that if the comparable entity or entity's transaction broadly conforms to the assessee's functioning, it has to enter into the matrix and be appropriately considered. Thus, the starting point is TP study and it is to be conducted by an assessee, wherein it has to demonstrate that the IT.s entered in to it are at arm's length. The next step, as envisaged by the Rule, can be seen by the use of the expression none of the differences if any between the transactions being compared, or between the ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant or useful 10 determine the ALP of the IT.s, was available in public domain.Considering the z ersities of modern commercial activities, it is quite possible that basic or reliable data i.e. ~r arable may not readily be existent anywhere.The only alternate left, in such a situations ; identify similar type of comparables.In the present case the assessee is in the business of distribution of channels through various modes namely through DTHO.s/ MOSO.s/ CO.s. XVhile filing return for the last AY.(for a period of two months only)and for the current year, it carried out a search to identify similar business or entity for determining the ALP.But, the exercise did not yield any positive result on both the occasions.So, it adopted the LSD as the nearest possible comparable sector.The TPO initially rejected the comparability of LSD and distribution of channels, while passing the order u/s.92 of the Act for the earlier AY.But, later on accepted the'TP study of the assessee for the AY.2010-11. While passing the order for the current AY, the TPO again held that both the activities cannot be compared as valid compa -rabies and directed the assessee to submit agreements entered in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so have, on its own, gathered the requisite information from the internet about the comparables adopted by the TPO. But, that would not absolve the TPO to confront the assessee with the material that he wanted to rely upon.If the assessee cannot decide as to which documents are relevant for the TPO to determine the ALP, then the TPO also cannot deprive the assessee of the its rights.Thus, both the parties have not played their part in the manner they were supposed to play.The lapses on part of the assessee and the TPO are of not trivial or technical nature.They go to the root of the issue. Non availability of data for determining ALP for a particular industry/sector/business and resultant failed search is not an abnormal phenomenon. As compared to other sections of the Act. TP provisions are at nfancy stage and therefore, teething problems are bound to happen.Therefore, a method acceptable to both the parties has to be found. h will take some time to dust to settle.But, basic principles have to be adhered.Considering the above, we are of the opinion that that there is need for further investigation and verification.So, in the interest. of justice, we are restoring ..... X X X X Extracts X X X X X X X X Extracts X X X X
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