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TMI Blog2011 (6) TMI 1035X X X X Extracts X X X X X X X X Extracts X X X X ..... lated services. It has filed its return of income on Ist of November 2004 declaring an income of Rs.7,82,54,384. The software related business was being carried out by the assessee from Software Technological Park (STP), Scheme notified by the Government of India in the Ministry of Commerce and Industries. The undertakings were operational at three different address, namely, (i) Birlasoft Software Technology Park Block-III, 2nd Floor Ganga Shopping Complex, Sector-29, NOIDA-201303 (ii) Birlasoft (GE-GDC) Software Technology Park Block-III, 3rd Floor, Ganga Shopping Complex, Sector 29, Noida-201303 (iii) Birlasoft 36, Vijayaraghava Road, 3 T. Nagar, Chennai. The assessee had a branch office in Australia and Singapore which were also engaged in the business of developing and supplying customized computer software and related software services to both associated enterprises and other unrelated enterprises outside India. On scrutiny of the accounts, Assessing Officer found three international transactions undertaken by the assessee with its associated enterprises during the accounting year relevant for the present assessment year. The Learned C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etween the parties for determination of ALP with respect to international transaction is in a very narrow compass. In order to examine the issue, whether any adjustment is required to be made in the ALP disclosed by the assessee relating to its international transaction with its associate enterprises, the first area of dispute which could arise between the parties is in respect of most appropriate method required to be adopted for determination of ALP as provided in sec. 92C of the Income-tax Act, 1961 read with rule 10B of the IT Rules. Section 92C provides five main methods and one residuary method. These are (a) comparable controlled price method; (b) resale price method; (c) cost plus method; (d)profits split method; and (e) transactional net margin method and the residuary method is; such other method as may be prescribed by the board. In the present year, on an analysis of the international transaction with the associate parties and data of comparables, assessee has selected TNMM, using net profit margin based on cost as PLI. This method is not disputed by the TPO hence we can say that both sides are in agreement on the method. 6. The next area of dispute is use of current ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatives have not advanced detailed argument on selection of comparables. The dispute raised before us at the time of hearing was whether Assessing Officer is justified in considering the each STP Unit as a stand alone unit for computing the ALP. In other words, whether result of all the STP units has to be considered for working out the operating profit. The learned counsel for the assessee submitted that assessee has transaction with unrelated parties also, therefore, for the purpose of benchmarking its internal comparables are one of the best comparables. He pointed out that this issue has arisen in assessment year 2006-07 also where Hon ble Bench has upheld the internal bench marking analysis undertaken by the assessee while justifying the ALP of international transaction for software development services. Learned DR at the time of hearing pointed out that internal comparison needs to be refined to account for geographical differences between internal and external segments. According to him, there can be various reasons for requiring adjustment and these factors are strength of currency, labour cost etc. in different geographical conditions. He pointed out that a service sold in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Soft UK on continuing basis. 13. The terms and conditions for rendering such services by each of STP Unit was governed by one single agreement entered into between Birla Soft India and Birla Soft Inc. US. The learned TPO has assumed that functions, assets and risk undertaken by each of the STP Unit are distinct from each other and is comparable with the function, assets and risk undertaken by existing comparables. In other words, learned TPO has totally ignored the unity of the business, administrative control and unity of funds etc. The independent FAR analysis of each unit with existing comparables is practically not possible because there is a common management, interlacing of the funds etc. 14. Thus, on due consideration of the order of the Learned CIT(Appeals), we are satisfied that Learned First Appellate Authority rightly did not concur with the conclusion of the TPO for segregating the each STP Unit and considering the result of each STP Unit as a stand alone for the purpose of determining the ALP relating to international transaction. 15. In assessment year 2006-07, ITAT has upheld the benchmarking of internal international transactions with unrelated parties for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision and has paid the same on monthly basis. On an annual basis, the Branch is further obligated to reconcile the annual wages and pay the differential or is entitled to receive the tax back if paid extra. The accounting period for this activity is July Ist through June 30th. Based on the reconciliation, Australia branch was obligated to pay Rs.19,26,120 and this was paid within the permissible period in July 2003 . 18. The Assessing Officer did not accept the contention of the assessee. He recorded a finding that these amounts cannot be said to be accrued and crystallized during the accounting year, hence he made the addition. On appeal, Learned CIT(Appeals) deleted the addition by following the decision of Hon'ble Gujarat High Court in the case of Sourasthra Cement Chemical Ind. Vs. CIT, reported in 123 ITR 669. 19. With the assistance of learned representatives, we have gone through the record carefully. The actual liability to pay to reconciled pay roll taxes has actually accrued and crystallized on June 30, 2003. When the reconciliation of Australian pay roll tax was done, pursuant to the closure of Australian tax year. Learned CIT(Appeals) has appreciated ..... X X X X Extracts X X X X X X X X Extracts X X X X
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