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TMI Blog2018 (10) TMI 1886X X X X Extracts X X X X X X X X Extracts X X X X ..... eliance on the decision of Co-ordinate Bench of the Tribunal in the case of WIKA Instruments India Pvt. Ltd. [ 2018 (4) TMI 1637 - ITAT PUNE ] - Appeal of Revenue is dismissed being devoid of any merit. Most appropriate method to be applied for determining Arm s Length Price (ALP) of international transactions in respect of provision for engineering design and services - HELD THAT:- From the order of the Tribunal for assessment year 2009-10 we find merit in the plea of assessee that hourly rates charged by it in providing specialized services to its associated enterprises can be the basis for verifying its stand as to whether the services provided by the assessee to its associated enterprises were at arm s length. However, the stand of Assessing Officer / TPO in rejecting the said plea of assessee was the tainted transactions vis- -vis costs incurred by the assessee both for associated enterprises and non-associated enterprises. In the totality of the above said facts and circumstances, where the stand of assessee has not been looked into by the TPO and has been brushed aside, we in the interest of justice, direct the Assessing Officer / TPO to determine arm s length price of inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of Transfer Pricing Adjustments 3. The AO in pursuance of the directions given by the DRP erred in confirming the addition of INR 2,25,23,332 being upward adjustment made by the learned Transfer Pricing Officer (TPO) while determining the arm's length price in respect of the appellant's international transactions; with regard to provision of engineering design services. 4. The AO/DRP/TPO erred in rejecting CUP as the most appropriate method (MAM) to determine the arm's length price of the international transactions pertaining to provision of engineering design services to its AE without giving cogent reasons and complying with the provisions of the section 92C(3) of the Act. 5. The AO/DRP/TPO erred in rejecting the internal TNMM analysis conducted by the appellant on the basis of audited segmental accounts for benchmarking the international transactions, without giving cogent reasons. 6. The AO/DRP/TPO erred in not considering the appellant's claim for deduction of extra-ordinary cost/non-operating expenses like underutilization of manpower capacity and infrastructure capacity, etc., while computing the operating margin of the appellant. 7. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in appeal are identical to the grounds raised in assessment year 2010-11 in ITA No. 517/PUN/2015. The Co-ordinate Bench of the Tribunal vide order dated 08-08-2018 has adjudicated the appeal of assessee for assessment year 2010-11. 4.1 The ld. AR submitted that in the present appeal, the assessee is not pressing ground Nos. 1 and 2. In ground Nos. 3 to 7 the assessee has assailed the action of authorities below in rejecting CUP/internal Transactional Net Margin Method (TNMM) as the most appropriate method for determining arm's length price of the international transactions. The ground Nos. 8 to 13 are in support of the main grounds raised in ground Nos. 3 to 7. In ground No. 14 the assessee is seeking directions to the TPO to comply with the directions of DRP. The ld. AR submitted that there has been no change in the facts and the issues in assessment year under appeal are identical to the issues raised in assessment year 2010-11. 4.2 In respect of appeal filed by the Department the ld. AR submitted that the Revenue has assailed in allowing proportionate adjustments at entity level. The issue raised by the Revenue is squarely covered by the decision of Pune Bench of the Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , if any, has to be made vis-à-vis associated enterprises transactions and not on entity level. The learned Authorized Representative for the assessee referred to the order of TPO and pointed out that transactions with associated enterprises were to the tune of ₹ 16.04 crores, whereas the Assessing Officer had taken the entire turnover of ₹ 58.85 crores as basis for working out transfer pricing adjustment. We find this issue is squarely covered by the ratio laid down by Hon'ble Bombay High Court in CIT Vs. Thyssen Krupp Industries India P. Ltd. (supra), wherein it has been held that adjustment, if any, on account of transfer pricing provisions is to be made to the associated enterprises segment only and not on entity level. Accordingly, we direct the Assessing Officer / TPO to re-compute the arm's length price of international transactions of assessee with its associated enterprises on the basis of transactions with associated enterprises only and not on entity level. The ground of appeal No.6 raised by the assessee is thus, allowed." 7. We further find that the Hon'ble Jurisdictional High Court in the case of Commissioner of Income Tax Vs. ALSTOM Projects I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterprises by applying the margin at entity level which is not the object of Chapter X of the Act. Absence of segmental accounting is not an insurmountable issue, as proportionate basis could be adopted as done by the Delhi High Court in Keihin Panalfa Ltd. (supra)." 8. Thus, in view of the facts of the case and the decision of Hon'ble Jurisdictional High Court, the appeal of Revenue is dismissed being devoid of any merit. 9. Now, we proceed to decide the appeal of assessee. The ground Nos. 1 and 2 of the appeal are dismissed as not pressed. 10. We find that ground Nos. 4 and 5 are identical to the ground Nos. 4 to 6 raised in appeal for assessment year 2010-11. It is an admitted position that the facts in assessment year under appeal are similar to the facts in assessment year 2010-11. The Tribunal decided the ground Nos. 3 to 11 in assessment year 2010-11 holding as under : "7. Both the sides have admitted that the main issue raised in the present appeal is the most appropriate method to be applied for determining Arm's Length Price (ALP) of international transactions in respect of provision for engineering design and services. We find that identical grounds were raised befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services are being provided to the domestic and non-associated enterprises parties, the question which arises is can the same be compared especially where the costs are from the same source and hence, the transactions are tainted. 15. We have already taken a view in the case of DCIT Vs. Man Trucks India Pvt. Ltd. in ITA No.547/PUN/2014 and in appeal filed by assessee in ITA No.582/PUN/2014, relating to assessment year 2009-10, order dated 03.04.2018, where the costs are identical for providing services, then even if the costs borne for associated enterprises and non-associated enterprises or the domestic parties are same, the same can be ignored in order to benchmark arm's length price of international transactions undertaken by the assessee. Accordingly, we find merit in the plea of assessee that hourly rates charged by it in providing specialized services to its associated enterprises can be the basis for verifying its stand as to whether the services provided by the assessee to its associated enterprises were at arm's length. However, the stand of Assessing Officer / TPO in rejecting the said plea of assessee was the tainted transactions vis-à-vis costs incurr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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