9911796707
TMI Blog2018 (6) TMI 1752X X X X Extracts X X X X X X X X Extracts X X X X ..... h. 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 international transactions undertaken by the assessee by applying most appropriate method i.e. internal TNMM method of man hourly rates. The assessee has also asked for various other adjustments for carving out differences which may also be looked into by the TPO, who shall decide the issue after affording reasonable opportunity of hearing to the assessee and determine arm's length price of international transactions. - ITA No. 314/PUN/2014 - - - Dated:- 5-6-2018 - Ms. Sushma Chowla, JM And Shri Anil Chaturvedi, AM For the Appellant : S/Shri Vispi Patel Suresh Dhoot. For the Respondent : Shri Rajeev Kumar, CIT. ORDER Per Sushma Chowla, JM: The appeal filed by the assessee is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant is higher as compared to the comparable company's margin even while applying TNMM. 9. The AO/DRP/TPO erred in rejecting the internal TNMM analysis conducted by the assessee for benchmarking the international transactions. 10. The AO/DRP/TPO erred in not granting the relief as provided in second proviso to section 92C(2) of the Act. 11. The learned AO in pursuance of the directions of DRP erred in levying interest under section 234A, 234B, 234C, 234D and 201(1A) of the Act. 12. The learned AO in pursuance of the directions of DRP erred in initiating penalty proceedings under section 274 r.w. section 271(1)(c) of the Act. 3. Briefly, in the facts of the case, the assessee had furnished return of income declaring total income at Nil after claiming loss of ₹ 7,13,86,774/-. The assessee was rendering engineering design services, in the automobile sector to the foreign and domestic sector. The assessee was subsidiary company of Magna Steyr Fahrzeougtechnik AG Co KG, Austria. The assessee was a registered 100% Export Oriented Unit. The assessee was Engineering Centre for Magna Styer Group and it provided engineering and design services, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CUP 6 IT Support (Connectivity charges) 37,22,710 CUP 7 Catia Licenses Fees 2,93,82,390 - 8 Sharing of Costs of SAP licenses 66,24,848 - 9 Reimbursement of Expenses 1,25,01,897 - Total 18,28,05,968 4. The assessee explained the switchover from TNMM method to CUP method on the basis of budgeted rate which was worked out from current TP audit. The assessee based on the estimation of cost had worked out the rates at 24 Euros per hour and during the TP audit, the assessee was asked to explain the cost components of budgeted rate which was not explained by the assessee before the TPO. During the course of TP proceedings, the TPO found that arm's length price determination on CUP suffered from several infirmities and hence, the assessee was issued show cause notice to explain as to why CUP method as most appropriate method s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's length price on TNMM basis. The assessee identified only one comparable i.e. Cades Digitech Pvt. Ltd. with negative margin of 13.72%. The TPO however, selected final set of comparables including Cades Digitech Pvt. Ltd. selected by the assessee. The other concerns selected to be functionally comparable were KLG Systel Ltd., Cosmic Global Ltd. and Genesys. The mean margins of said comparables worked out to 26.89%. The assessee company had worked out its PLI at OP/TC in export segment at (-) 25.67%, as per profits split certified by a CA dated 30.10.2012. The TPO made an adjustment of ₹ 8,88,53,258/- to international transactions relating to provision of IT Enabled Services by the assessee to its associated enterprises. The Assessing Officer proposed the aforesaid upward adjustment, against which the assessee filed objections to the Dispute Resolution Panel (DRP), which rejected the objections of assessee and confirmed the proposed adjustment. The Assessing Officer thus, passed order under section 143(3) r.w.s. 144C of the Act and adjustment of ₹ 8.88 crores. 6. The assessee is in appeal against the aforesaid adjustments made in its hands by raising different as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esentative for the Revenue here placed reliance on the order of Tribunal in assessee s own case relating to assessment year 2008-09, wherein the Tribunal had sent the issue back to the file of TPO/Assessing Officer because of varying stands of assessee. He then took us to FAR analysis which was referred to by TPO in paras 11 to 11.20, 12 to 12.3 and 13 and the final analysis in para 16 where the TPO had applied TNMM method. 9. The learned Authorized Representative for the assessee in rejoinder stressed that mandate of section 92(1) of the Act had to be achieved, so most appropriate method had to be applied. He also pointed out that all the employees were mechanical engineers who were providing engineering design services to associated enterprises and all cost for IT services and also cost of IT services were reimbursed. 10. We have heard the rival contentions and perused the record. The issue which arises in the present appeal filed by the assessee is against transfer pricing adjustment made in engineering design services provided by the assessee to its associated enterprises. The assessee was also providing the said services to domestic and non-associated enterprises during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the Tribunal as to adoption of most appropriate method for benchmarking international transactions. The assessee in the said year also was changing its stand from stage to stage i.e. in the initial stage of filing the return of income, the assessee had applied CPM method as most appropriate method on the ground that it was having cost plus mark up. The TPO did not agree with the submissions of assessee and proposed to apply TNMM method. The assessee during the course of TP proceedings proposed a set of comparables, which according to it, were functionally similar and also pointed out that no adjustment is to be made on account of arm's length price of international transactions as the margins shown by the assessee were higher than the mean margins of comparables selected. The TPO made fresh search and selected other comparables and finally made an adjustment of ₹ 4.93 crores against export sales of ₹ 3.90 crores. Before the DRP in assessment year 2008-09, the assessee furnished additional objections and evidences and pointed out that CUP method was appropriate method. The assessee furnishing pricing methodology adopted by it and also its business description ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er BV Vs. DCIT (supra). Further, the learned Authorized Representative for the assessee has placed reliance on series of decisions, which we have referred to in the arguments of the learned Authorized Representative for the assessee, but are not deciding the applicability of the said decisions to the facts of the present case, in view of our setting aside the matter back to the file of TPO. The application of transfer pricing provisions has undergone development and in the interest of justice, we are of the view that this issue needs to be looked into de novo by the TPO / AO in order to correctly determine the arm's length price of international transaction entered into by the assessee. We are not adjudicating the issue as to which method is to be applied and the Assessing Officer is at liberty to decide the issue after giving reasonable opportunity of hearing to the assessee as to the most appropriate method for benchmarking international transaction and after considering the various aspects raised by the assessee with regard to the carving out the expenses on account of under-utilization of capacity and manpower. The Assessing Officer shall consider the various objections rai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppropriate method and the same may be what has been applied by the assessee in TP study report or as proposed in TP proceedings. The stand of assessee that it is providing services to its associated enterprises and charging hourly rates, which worked out to 24 Euros per hour as against charges raised against non-associated enterprises and domestic parties. The assessee is providing specialized services in the field of engineering design services and where similar 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
