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TMI Blog2021 (3) TMI 146X X X X Extracts X X X X X X X X Extracts X X X X ..... specified that if the variation between the Arm s Length Price and price at which international transaction has actually been undertaken does not exceed 5% of transaction price, there should not be a T P adjustment. So in the present case, if cost incurred is 100, the assessee is paying 105 after 5% mark up and therefore, even if in the case of the comparable, the payment is made of ₹ 100/- without any mark up then also the payment made by the assessee after 5% mark up is excess by 5% only for which no TP adjustment can be made up in these two assessment years involved in the present two appeals i.e. A. Y. 2010 11 and 2011 12 because the amendment in this proviso has taken place from Assessment Year 2012 13 and therefore, in the present two years, the unamended provisions are applicable and as per that, for up to +/- 5% difference, no T P adjustment is called for in these two years. We find no merit in the TP adjustment proposed by the TPO and approved by DRP and AO and we delete the same in both years. - Shri Arun Kumar Garodia, AM And Shri George Bench: K, JM For the Assessee : Shri. Ajit Tolani, Advocate,Shri. Darpan Kirpalani, Advocate, Ms. Ruchita Paddy, Advocate For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O has noted that it is seen from the TP documents filed by the assessee that the tax payer has selected TNMM as the most appropriate method (MAM) to evaluate the arm s length standard for the international transaction with its AE, PharmARC, Swiss and selected 5 Switzerland comparable service providers with the weighted arithmetic mean margin for 3 years at 10.40% on cost and in the international transaction with its AE, PharmARC, USA, the taxpayer selected 20 US comparable companies, with the weighted arithmetic mean margin for 3 years at 6.69%. Thereafter, he pointed out that in para 6.3 of his order, the TPO has observed that in view of the facts that the tax payer has selected foreign companies for comparison under TNMM and for the reasons mentioned in the show cause notice dated 12.12.2013, the TPO rejected the TP study. Thereafter, he pointed out that the said notice 12.12.2013 issued by the TPO is available on pages 154 to 163 of the Paper Book and in particular, he pointed out that in the said notice, the TPO has observed that the assessee has adopted the foreign AEs as tested parties but because these AEs are in entirely different geographical area, the nature, the function ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and pointed out that in para 7.3, it is observed by DRP that the functions and risks of the assessee are more complex in nature and that numerous adjustments will have to be made if the foreign entity would be taken as a tested party and in this regard, the DRP has taken guidance from the Tribunal order of the Mumbai Bench rendered in the case of Onward Technologies and Aurionpro Solutions cases and reproduced a para from this Tribunal order in which it is stated as under: The contention of the ld. AR in considering the profit of the foreign AE as 'profit A' for the purposes of comparison with profit of comparables, being 'profit B', to determine the ALP of transaction between the assessee and its foreign AE. misses the wood from the tree by making the substantive section 92 otiose and the definition of ' internal transaction' u/s 92B and rule 10B redundant. This is patently an unacceptable position having no sanction of the Indian transfer pricing law. Borrowing a contrary mandate of the TP provisions of other countries and reading it into our provisions is not permissible Therefore, the objection is rejected. 4. He submitted that in the present case, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciated enterprises as tested parties as per the transfer pricing documentation ought to be accepted. 7.2 It is seen that the Assessee has chosen its subsidiaries M/s PharmARC Inc USA and M/s. PharmARC, its own AEs as tested parties for TP analysis and the same was rejected by TPO. 7.3 This Panel is not able to accept the objection regarding rejection of foreign AEs as tested parties. The functions and risks of the assessee are more complex in nature and that numerous adjustments would have to be made if a foreign entity would be taken as a tested party. Guidance is taken from decisions of Mumbai ITAT in Onward Technologies Aurionpro Solutions cases. 7. From the above paras reproduced from the DRP directions, it is seen that this is the finding of DRP that the functions and risks of the assessee are more complex in nature and that numerous adjustments would have to be made if the foreign entity would be taken as a tested party. We fail to understand the logic behind this observation of DRP because if we are taking the foreign AEs as tested party, comparison has to be between comparables of the respective country selected by the assessee in TP study and such foreign AE selected as te ..... X X X X Extracts X X X X X X X X Extracts X X X X
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