Income Tax Appellate Tribunal - Kolkata
Datex Ohmeda (I) Pvt Ltd.(Since Merged ... vs Assessee on 9 July, 2014
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A s s es s m en t ye ar : 2 0 0 8 - 2 0 0 9
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IN THE INCOME TAX APP ELLATE TRIBUNAL,
KOLKATA 'A' BENCH, KOLKATA
Before Shri Shamim Yahya (Accountant Member),
and Shri George Mathan (Judicial Member)
I.T .A. No. 18 48/Kol./ 2012
Assessment year : 200 8-2009
Datex Ohmed a (I) Pv t. Ltd.,.................................... .................. ......Appellan t
(Since me rge d with Wipro GE Heathcare Priv ate Ltd.) ,
3, Preto ri a Stree t,
3 r d Floo r,
Kolkata-700 020
[PAN :AABCD 1182 E]
-Vs.-
Deputy Commissione r of Income Tax ,........................................ ....Responden t
Circle-2, Kolkata ,
Aayaka r Bhawan,
P-7, Chowringhee Squa re ,
7 t h Floor,
Kolkata-700 069
Appearances by:
Shri N. Venkatraman, Sr. Cou nsel & Shri Ajay Agarwal, FCA, fo r the assessee
Shri Varinder Mehta, CIT, D.R., for the Department
Date of co ncluding the hearing : Ju ly 07, 2014
Date of pronouncing the orde r : Ju ly 09, 2014
O R D E R
Per George Mathan:
This is an appeal fil ed by the assessee against the assessment order passed by DCIT, Range-2, Kolkata under section 144 read with section 144C(13) of the Income Tax Act, 1961 (in short "the Act") dated 18 t h October, 2012 for the assessment year 2008-09.
2. Shri N. Venkatraman, ld. Sr. Counsel alongwith S hri Ajay Agarwal , FCA represented on behalf of the assessee and Shri Varinder Mehta, ld. CIT (D.R.), represented on behalf of the Revenue.
3. In the assessee's appeal , the assessee has raised the following grounds:-
I .T.A . N o . 1 8 4 8 / Kol. / 2 0 1 2 A s s es s m en t ye ar : 2 0 0 8 - 2 0 0 9 Page 2 of 15 General Grounds:
1. That on the facts and in the circumstances of the case, the order of the Transfer Pricing Officer III (hereinafter referred to as 'Ld.TPO) passed u/s. 92 CA(3) of the Income-tax act, 1961, (hereinafter referred to as the 'Act'), subsequently confirmed by the Dispute Resolution Panel (hereinafter referred to as 'Ld. Panel) and consequently incorporated by the Deputy Commissioner of Income-tax, Circle-2, Kolkata (hereinafter referred to as 'Ld. AO') in the assessment order u/s. 143(3) r.w.s 144C(13) of the Income-tax Act, 19961 (hereinafter referred to as the 'Act') is erroneous on facts and bad in law.
2. That on the facts and in the circumstances of the case the Ld. Panel and accordingly the Ld. AO has erred in making an adjustment of Rs.69,130,255 to the International transactions of the appellant with its Associated Enterprise (hereinafter referred to as 'AE') Special Grounds:
1. Without prejudice to the other ground of the appellant, the Ld.AO, erred in law and in facts by not giving effect to the Directions issued by the Ld. Panel under section 144C(5) of the Act, for considering the date of the comparable companies from audited accounts for computing the Profit Level Indicator (hereinafter referred to as 'PLI'), while determining the Transfer Pricing (hereinafter referred to as 'TP') adjustment in the final assessment order. The erroneous approach of the Ld. TPO resulted in increasing the TP adjustment by Rs.19,96,433 from Rs.49,167,822 to Rs.69,130,255. The appellant had filed a rectification application under section 154 of the Act before the Ld. AO to give effect to the Direction passed by the Ld. Panel in computing the TP adjustment.
2. That on the facts and in the circumstances of the case the Ld. Panel and consequently the Ld. AO has erred in rejecting the TP study undertaken by the appellant.
3. That on the facts and circumstances of the case, without prejudice to the above ground, the Ld. Panel and accordingly the Ld. AO has erred in computing the PLI of comparable companies selected on the basis of a fresh search adopted by the Ld. TPO, by including profits earned at an entity level instead of considering the profits earned from the relevant trading/product segment of these comparables.
4. That on the facts and circumstances of the case, the Ld. Panel and consequently the Ld. AO erred in rejecting the available trading/product segmental information for 4 comparables selected by the Ld. TPO based on non-
availability of such trading/product information for only one comparable company.
5. That on the facts and circumstances of the case, without prejudice to the above mentioned grounds, the Ld. Panel and consequently the Ld. AO has erred in considering the total company level information for determining the arm's length price, thus making TP adjustment to the transactions of the appellant with third parties, whereas Section 92 of the Act is applicable only to international transactions as given in Section 92B of the Act, thereby resulting in absurd and erroneous transfer pricing adjustment.
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6. That on the facts and in the circumstances of the case the Ld. Panel and consequently the Ld. AO has erred in not providing the benefit of 5% tolerance as provided in the proviso to section 92C(2) of the Act in determining the arm's length price of the international transaction of the appellant with its AEs.
7. The Ld. Panel and consequently the Ld. AO, erred in confirming the fresh search for comparability analysis (FY 2007-08). By following the said approach the Ld. TPO himself travelled beyond the date of compliance resulting into impossibility of performance and against the premise of maintenance of 'contemporaneous documentation'. Accordingly, the Ld. TPO has wrongly penalized the assessee with the use of such additional information and consequently claimed that the TP Study suffers from various infirmities.
8. That on the facts and in the circumstances of the case the Ld. Panel and consequently the Ld. AO has erred by determining the arm's length mark-up based on the data for financial year 2007-2008 to the exclusion of prior year data [ as contemplated under Rule 10B(4) of the Rules ].
9. That on the facts and circumstances of the case, the Ld. Panel and consequently the Ld. AO erred in disallowing the claim of depreciation on technical know- how to the extent of Rs.4,37,994.
10. That on the facts and in the circumstances of the case, the Ld. Panel and consequently the Ld. AO erred in disallowing the claim of Rs. 2,92,22,652 u/s. 43B.
11. That on the facts and circumstances of the case, the Ld. Panel and consequently the Ld. AO erred in disallowing the claim of Rs.13,58,291 on account of lease rental.
12. That on the facts and circumstances of the case, the Ld. Panel and consequently the Ld. AO erred in disallowing an amount of Rs.79,87,091 on ad- hoc basis.
13. That on the facts and circumstances of the case, the Ld. Panel and consequently the Ld. AO erred in disallowing an amount of Rs.4,05,95,283, being the difference in sale as per audited accounts and sales as per sales tax return.
14. That on the facts and in the circumstances of the case, the Ld. AO erred in not granting credit for the TDS of Rs.5,65,293/- claimed by the appellant.
15. That on the facts and circumstances of the case, the Ld. AO erred in not allowing the carried forward losses of the appellant.
16. That on the facts and circumstances of the case the Ld. AO erred in imposing interest u/s. 234B & 234D.
17.That the appellant craves leave to add to and to alter, amend, rescind or modify the grounds raised hereinabove before or at the time of hearing of the appeal.
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4. At the time of hearing, it was submitted by the ld. S r. Counsel that General Grounds no. 1 & 2 were general in nature and in respect of Special Grounds, there were basically four issues being (1) to consider the audited balance-sheet of the comparable cases which had been taken for comparison for determining the Profit Level Indicator (in short "the PLI") while determining the Transfer Pricing; (2) to consider the segmented demarcation of the comparables while determining the Profit Level Indicator when determining the Transfer Pricing; (3) to consider the principle of proportionality in respect of the Associated Enterprises and the Non-Associated Enterprises transactions of the assessee when determining the Transfer Pricing; and (4) the grounds in relation to other Corporate additions. It was the submission that when determining the transfer pricing adjustments in the case of the assessee, the Transfer Pricing Officer (in short "the TPO") had adopted five comparables namely
(i) Advanced Micronic Devices Limited, (ii) Hemant Surgical Industries Ltd., (iii) Paramount Surgimed Limited, (iv) RFCL Limited, and (v) South India S urgical Co. Limited. It was the submission that as per the Transfer Pricing Study in respect of the assessee, the gross profit to sales ratio was arrived at 27.88%. It was the submission that t he ld. TPO had verified the Prowess and Capitaline Data Base and had determined the five comparable companies and had arrived at a gross profit to sales ratio at 39.03%. Consequently ld. TPO had proposed to adopt the said 39.03% as the relevant GP/sales ratio in the case of the assessee and had proceeded to make the addition. It was the submission that the issue was referred to the Dispute Resolution Panel (in short "the DRP") who had directed that the A ssessing Officer for the purpose of computation of the Profit Level Indicator was to take the figures from the audited accounts after verification. However, the Assessing Officer when completing the assessment did not do so and had consequently violated the directions given by the Dispute Resolution Panel in its directions dated 14.09.2012. It was the submission that the Ground No. 1 of the S pecial Grounds was I .T.A . N o . 1 8 4 8 / Kol. / 2 0 1 2 A s s es s m en t ye ar : 2 0 0 8 - 2 0 0 9 Page 5 of 15 against this action of the Assessing Officer. Ld. Sr. Counsel drew our attention to the para after 4.14 wherein the Dispute Resolution Panel has directed as follows:-
"The data culled from audited accounts is the primary source of Pro wess and Capitaline data base. That being so, the A.O. for the p urposes o f computation of PLI is directed to take the figures from the audited accounts after verification".
5. It was the submission that the Assessing Officer may be directed to consider the audited accounts of the comparables. It was the submission that once the said audited accounts are considered the variation in the gross profit to sales ratio would come down from 39.03% to 35.81%. It was the further submission that when considering the audited Balance- sheet and Profit & Loss A/c of comparable cases, the Assessing Officer must be directed to take into consideration only the segmented portion of such segment as relating to comparable products dealt with by the assessee. It was the submission that the assessee is engaged in trading and provision of services in respect of medical equipments. It was the submission that in respect of comparable companies, the comparable companies had other business segments also. It was the further submission that the audited balance-sheet and profit & loss accounts of the comparables which had been selected by the ld. TPO itself contained the segments and profitability of such segments and the gross profit percentage was clearly determinable in respect of their business in dealing more so trading and distribution in respect of medical equipments. It was the submission that the issue of the comparison on the basis of the segmented transactions was the view expressed by the various Benches of this Tribunal, a few of which referred to by the ld. Sr. Counsel as NetHawk Networks India Private Limited -vs.- ITO, Ward- 3(2)(1), Mumbai in ITA No. 7633/M/2012 in paras 29 & 30 which read as under :-
"29. On the other hand, ld. DR brought our attention to the segmental reporting data at page 374 and 375 o f the paper book and mentioned that the segmental data relating to software develop ment services was along co nsidered by the I .T.A . N o . 1 8 4 8 / Kol. / 2 0 1 2 A s s es s m en t ye ar : 2 0 0 8 - 2 0 0 9 Page 6 of 15 TPO. Therefo re, the orders o f the DRP / TPO do not call any change.
30. We have heard both the p arties and perused the said pages 374 & 375 of the paper book and found that the order o f the DRP is reaso nable and does not call for any interference. Accordingly, we dismiss the submissio n of the ld. AR".
Similarly in the case of M/s. Bearing Point Business Consulting Private Ltd., Bangalore -vs.- DCIT, Circle-11(2), Bangalore in ITA No. 1124/Bang/2011 at para 5.2.3 and 5.2.4 referred to by the ld. Sr. Counsel as under :-
"5.2.3. The above companies have been retained as comparables in conformity with the findings of the earlier Bench in the case of Trilogy E- Business (supra). It is to be noted that in the case of Trilogy E-Business, the Tribunal turned down the plea of the assessee that M/s. Megasoft Ltd should be rejected as comparable. However, the Tribunal accepted the alternative submission of the assessee that the segmental profit margin isto be reckoned with instead of entity level margin and held that the profit margin of 23.11% which is the margin of the software service segment be taken for comparability. The discussion and the findings of the Bench with regard to the acceptance of the alternative submission of the assessee to adopt the segmental margin of 23.11% is reproduced below:
"37. The next plea of the Assessee is that if at all this company is considered as a comparable then the segmental margin of 23.11% (which is the margin for software service segment) alone should be considered for comparability. On the above submission, we find that the TPO considered the segmental margin (Software service segment) in the case of Geometric, Kals Info systems, R Systems, Sasken Communication and Tata Elxsi. Before DRP the Assessee pointed out that the segmental margin of 23.11% alone should be taken for comparability. The DRP has not given any specific finding on the above plea of the Assessee. Perusal of the order of the TPO shows that the TPO relied on information which was given by this company in which this company had explained that it has two divisions viz., BLUEALLY DIVISION and XIUS-BCGI DIVISION. Xius-BCGIDivision does the business of product software (developing software). This company develops packaged products for the wireless and convergent telecom industry. These products are sold as packaged products to customers. While implementing these standardized products, customers may request the company to customize products or reconfigure products to fit into their business environment. Thereupon the company takes up the job of customizing the packaged software. The company also explained that 30 to 40% of the product software (software developed) would constitute packaged product and around 50% to 60% would constitute customized capabilities and expenses related to travelling, I .T.A . N o . 1 8 4 8 / Kol. / 2 0 1 2 A s s es s m en t ye ar : 2 0 0 8 - 2 0 0 9 Page 7 of 15 boarding and lodging expense. Based on the above reply, the TPO proceeded to hold that the comparable company was mainly into customization of software products developed (which was akin to software development) internally and that the portion of the revenue from development of software sold and used for customization was less than 25% of the overall revenues. The TPO therefore held that less than 25% of the revenues of the comparable are from software products and therefore the comparable satisfied TPO's filter of more than 75% of revenues from software development services. Having drawn the above conclusion, the TPO did not bother to quantify the revenues which can be attributed to software product development and software development service but adopted the margin of this company at the entity level. In terms of Rule 10B(3)(b) of the Rules, an uncontrolled transaction shall be comparable to an international transaction if--
(i) none of the differences, if any, between the transactions being compared, or between the enterprises entering into such transactions are likely to materially affect the price or cost charged or paid in, or the profit arising from, such transactions in the open market; or
(ii) reasonably accurate adjustments can be made to eliminate the material effects of such differences.
38. Neither the TPO nor the DRP have noticed that there is bound to be a difference between the Assessee and Megasoft and the profit arising to the Megasoft as a result of the existence of the software product segment and no finding has been given that reasonably accurate adjustments can be made to eliminate the material effects of such differences. For this reason, we are inclined to hold that the profit margin of 23.11% which is the margin of the software service segment be taken for comparability...........".
5.2.4 In conformity with the findings of the earlier Bench (supra), we are of the considered view that the TPO was justified in selecting M/s. Megasoft Ltd as comparable. However, the AO/TPO is directed to take segmental margins of 23.11% for comparability. It is ordered accordingly.
Similarly in the case of M/s. Trilogy E-Business Software India Private Ltd., Bangalore -vs.- DCIT, Circle-12(4), Bangalore in ITA No. 1054/Bang/2011 in paras 37 & 38 referred to by the ld. Sr. Counsel as under :-
"37. The next plea of the Assessee is that if at all this company is considered as a comparable then the segmental margin of 23.11% (which is the margin for software service segment) alone should be considered for comparability. On the above submission, we find that the TPO considered the segmental margin (Software service segment) in the case of Geometric, Kals Info systems, R Systems, Sasken Communication and Tata Elxsi.
I .T.A . N o . 1 8 4 8 / Kol. / 2 0 1 2 A s s es s m en t ye ar : 2 0 0 8 - 2 0 0 9 Page 8 of 15 Before DRP the Assessee pointed out that the segmental margin of 23.11% alone should be taken for comparability. The DRP has not given any specific finding on the above plea of the Assessee. Perusal of the order of the TPO shows that the TPO relied on information which was given by this company in which this company had explained that it has two divisions viz., BLUEALLY DIVISION and XIUS-BCGI DIVISION. Xius- BCGI Division does the business of product software (developing software). This company develops packaged products for the wireless andconvergent telecom industry. These products are sold as packaged products to customers. While implementing these standardized products, customers may request the company to customize products or reconfigure products to fit into their business environment. Thereupon the company takes up the job of customizing the packaged software. The company also explained that 30 to 40% of the product software (software developed) would constitute packaged product and around 50% to 60% would constitute customized capabilities and expenses related to travelling, boarding and lodging expense. Based on the above reply, the TPO proceeded to hold that the comparable company was mainly into customization of software products developed (which was akin to software development) internally and that the portion of the revenue from development of software sold and used for customization was less than 25% of the overall revenues. The TPO therefore held that less than 25% of the revenues of the comparable are from software products and therefore the comparable satisfied TPO's filter of more than 75% of revenues from software development services. Having drawn the above conclusion, the TPO did not bother to quantify the revenues which can be attributed to software product development and software development service but adopted the margin of this company at the entity level. In terms of Rule 10B(3)(b) of the Rules, an uncontrolled transaction shall be comparable to an international transaction if--
(i) none of the differences, if any, between the transactions being compared, or between the enterprises entering into such transactions are likely to materially affect the price or cost charged or paid in, or the profit arising from, such transactions in the open market; or
(ii) reasonably accurate adjustments can be made to eliminate the material effects of such differences.
38. Neither the TPO nor the DRP have noticed that there is bound to be a difference between the Assessee and Megasoft and the profit arising to the Megasoft as a result of the existence of the software product segment and no finding has been given that reasonably accurate adjustments can be made to eliminate the material effects of such differences. For this reason, we are inclined to hold that the profit margin of 23.11% which is the margin of the software service segment be taken for comparability. In view of the above conclusion, we do not wish to go into the question as to whether less than 25% of the revenues of the comparable are from software products and therefore the comparable satisfied TPO's filter of more than 75% of revenues from software development services.
6. It was the further submission that when determining the ALP for Transfer Pricing, the assessee's total turnover has been considered, whereas the assessee had a portion of its transactions with Associated Enterprises and had a portion with Non-Associated Enterprises. It was the submission that when the ld. TPO computed the ALP, he took into consideration even the non-Associated Enterprises transactions of the I .T.A . N o . 1 8 4 8 / Kol. / 2 0 1 2 A s s es s m en t ye ar : 2 0 0 8 - 2 0 0 9 Page 9 of 15 assessee. It was the submission that as per the decision of the coordinate Benches of this Tribunal, if any adjustments were to be made, such adjustments, if any, arising due to the computation of the ALP should be restricted only to the international transactions with its AE's and not to the entire turnover of the assessee. For this proposition, he relied upon the decision dated 20.04.2010 of the coordinate Bench of this Tribunal in the case of M/s. S tarlite -vs.- DCIT in ITA No. 925/Mum/2006 for the assessment year 2002-03 in para 13 which reads as under :-
"13. As in this case, TPO has not applied transactions Net Margin Method, as contemplated in the Act, we have no other alternative but to set aside her order. In any event as the assessee has also no t fulfilled its statutory obligatio ns contemplated in Chapter X of the Act, we deem it appropriate under the facts and circumstances of the case, to set aside the matter, to the file of the Assessing Officer for fresh adjudication. As bo th the assessee as well as the Assessing Officer have not follo wed the law, in the interest of justice we deem it appropriate to permit the assessee to furnish a fresh transfer pricing study report, in support o f its contentio n, that the transactions with associated enterp rises were in fact at arms length. We make it clear that the assessee would be entitled to furnish fresh information and documentation, or chose a fresh method as prescribed, as the most appropriate metho d, in supp ort of its case. The Assessing Officer as well as the TPO shall examine the report as contemplated under sectio n 92 E de novo after giving appropriate oppo rtunity to the assessee. We also agree with the arguments o f learned counsel for the assessee that adjustments, if any, arising due to computation of ALP should be restricted only to the internatio nal transactio ns and not to the entire turnover of the assesee-company. No addition can be made to local transaction under Chapter X of the Act. Such things are do ne only when the Assessing Officer invokes section 144. We direct the Assessing Officer to restrict the adjustments, if any only to international transactio ns, which are found by him to have taken place at a p rice o ther than ALP".
7. The decision dated 06.11.2009 of Hon'ble ITAT, Mumbai Bench in the case of IL Jin Electronics (I) (P) Ltd. -vs.- ACIT, Circle-11(1), New Delhi in ITA No. 438/Del/2008 for the assessment year 2003-04 in para 15 of the said order relied on by the l d. Sr. Counsel as under:-
I .T.A . N o . 1 8 4 8 / Kol. / 2 0 1 2 A s s es s m en t ye ar : 2 0 0 8 - 2 0 0 9 Page 10 of 15 "The assessee has also taken one alternative gro und o ut of the total raw materials consumed by the assessee for manufacturing print circuit bo ards, only 45.5 1 per cent o f the to tal raw materials were imported through assessee's associate concerns, and, therefore, any adjustment, if any called fo r, can only be made to the 45.51 per cent of the total turnover, and not to the total turno ver of the assessee. After considering the facts of the case, we do no t find any difficulty in accepting this contention of the assessee that at beset only 45.51 per cent of the operating pro fit can be attributed to imp orted raw material acquired from assessee's asso ciate concerns. In the present case, the Assessing Officer has calculated the operating p rofit on the entire sales of the assessee, which in o ur considered opinion, is not justified, when it is admitted position that only 45.51 per cent of raw material has been acquired by the assessee from its associate co ncerns for the purpose o f manufacturing items. The assessee has stated that the operating profit if applied to 45.51 per cent o f the turnover wo uld come to Rs.35,52,573/- as against operating pro fit of Rs.24,35,175/- booked by the assessee, and the difference thereo f wo uld only be called fo r to be made as addition to the pro fit shown by the assessee. We, therefore, direct the Assessing Officer to modify the assessment and make the adjustment o nly to the extent of difference in the arm's length operating profit with adjusted pro fit with reference to the 45.51 per cent of the turno ver and no t to the total turnover of the assessee. Therefore, to this extent, the additio n made by the Assessing Officer and further confirmed by the CIT(A) is reduced. We order acco rdingly".
Reliance has also been placed on the decision dated 25.02.2011 of the Hon'ble ITAT, M umbai Bench in the case of M /s. Tecnimount ICB Pvt. Ltd.
-vs.- ACIT-9(3), Mumbai in ITA No. 7098/Mum/2010 for the assessment year 2006-07 in para 24, which reads as under :-
"Now, coming to the main issue whether the segmental results are to be taken into consideration or profit margin at entity level is to be considered, we find that Chapter-X incorporates special provisions relating to avo iding o f tax in regard to international transactio ns and income from international transactions has to be determined at arm's length price. Therefore, as per the provisions contained under sectio ns 92 to 94, internatio nal transactio ns are to be taken into consideration. Therefo re, segmental results are to be I .T.A . N o . 1 8 4 8 / Kol. / 2 0 1 2 A s s es s m en t ye ar : 2 0 0 8 - 2 0 0 9 Page 11 of 15 considered and no t the pro fit at entity level. As regards the submissions o f learned Departmental Representative that with reference to segmental results, each and every internatio nal transaction has to be considered separately because all the activities are sep arate and pro fit margin will be different. Learned counsel objected to these submissions pointing o ut that it is not the appeal filed by the Revenue but by the assessee. He also submitted that the Tribunal has no power of enhancement and only segmental results have to be considered. On this count, we find that TPO has no t at all considered the segmental results and, therefo re, we refrain from making any observatio ns with reference to the submissio ns made by the learned Departmental Representative and consider it appropriate to only observe that the Assessing Officer will co nsider the segmental results and determine the arm's length price in accordance with law. Consequently, these gro unds of appeal are allo wed for statistical purposes in terms of our above observations".
It was thus the primary submission of ld. Sr. Counsel on behalf of the assessee that in respect of the transfer pricing issues, the three primary arguments on behal f of the assessee were that the computation of the ALP was to be done by taking into consideration the audited balance-sheet of the comparables, considering the segmented demarcation of the comparables in respect of the segment which is comparable to the assessee and apply the principle of proportionality in respect of the Associated Enterprises and the Non-Associated Enterprises transactions of the assessee.
8. In reply, ld. CIT (D.R.) vehemently supported the order of the Assessing Officer and ld. TPO. It was the submission that the factual verification of the comparables and the computation of the ALP were liable to be restored to the file of the Assessing Officer for re- adjudication. On this issue, ld. S r. Counsel submitted that he had no objection if the principles were laid down and for factual verification of the comparables and the quantification of the transfer pricing adjustments, and ALP, was restored to the file of the Assessing Officer. It was the further submission by the ld. Sr. Counsel that in respect of I .T.A . N o . 1 8 4 8 / Kol. / 2 0 1 2 A s s es s m en t ye ar : 2 0 0 8 - 2 0 0 9 Page 12 of 15 Ground No. 6, 5% tolerance as provided in the proviso to section 92C(2) of the Act may be granted to the assessee while determining the arm's length price (in short "the ALP") of the international transactions of the appellant with Associated Enterprises.
9. We have considered the rival submissions. At the outset, a perusal of the directions as issued by the Dispute Resolution Panel , which has been extracted earl ier being the paragraph after 4.14 of the DRP's order clearly shows that the ld. DRP has directed the Assessing Officer to take figures from the audited accounts after verification for the purpose o f computation of the Profit Level Indicator (PLI). This has not been done by the Assessing Officer or the l d. TPO. In these circumstances, the Assessing Officer is directed to comply with the said direction of the ld. DRP when computing the PLI in the case of the assessee.
10. Coming to the issue of segmented demarcation of the comparables, a perusal of the decision as has been quoted by the l d. S r. Counsel clearl y shows that it has been a consistent stand that when the audited accounts are being considered what is comparable is only the comparables between the assessee under analysis and the comparable entities. Admittedl y, an assessee which is having the business of trading in medical equipments, when being subjected to a transfer pricing study, cannot be compared with a comparable Company, which is having multiple activities in its totality. In such a case, such segment of the comparable entity which is having identical or similar activities to that of the assessee under Transfer Pricing Study is to be considered. In these circumstances, respectfully following the decisions of the coordinate Benches of this Tribunal referred to supra, the Assessing Officer is directed to consider only the segmented data of the comparable entities relating to the business activity simil ar to that of the assessee to be considered while determining the PLI for the purpose of computing the ALP.
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11. Coming to the issue of the principle of proportionality, it is noticed that the issue in appeal is a transfer pricing issue, wherein the arm's length price being determined in respect of the transactions between the assessee and its international transactions with Associated Enterprises. Admittedl y the assessee had transactions with both Associated Enterprises and Non-Associated Enterprises. The arm's length price is being determined in respect of the transactions with the Associated Enterprises only. Consequently the transactions with the Non-Associated Enterprises cannot be considered for the purpose of determining the arm's length price. This is also in line with the decisions of the coordinate Benches of the Tribunal referred to supra. Admittedly a perusal of the audited balance-sheet and profit & loss a/cs. of the various comparables which have been adopted by the ld. TPO and copies of which have been placed in the paper book by the assessee, clearly show that some of the comparables do have transactions with their connected international Associated Enterprises as also Non-Associated Enterprises similar to the assessee. In most cases, the Associated Enterprises are foreign companies/ entities. In one of the cases being Hemant Surgical Industries India Limited, a perusal of its balance-sheet and profit & loss a/c. shows that it does not have any international transaction with any Associated Enterprise and its transaction is exclusively with other Indian companies. It is also rightly pointed out by the ld. S r. Counsel that M/s. Hemant Surgicals Industires Ltd. has only one nature of business being manufacture and sale of medical equipments. It is not purchasing and selling any medical equipment of any foreign company, and consequently there is no multiple-segmentation in respect of its business. Consequentl y the Assessing Officer is directed to take into consideration only the transactions of the assessee as also the comparables which are under consideration that they have with their respective international transactions with the Associated Enterprises when determining the PLI for the purpose of arriving at the A LP. The Assessing Officer is also further directed to grant the assessee 5% tolerance as provided in the I .T.A . N o . 1 8 4 8 / Kol. / 2 0 1 2 A s s es s m en t ye ar : 2 0 0 8 - 2 0 0 9 Page 14 of 15 proviso to section 92C(2) of the Act if found applicable. With these directions, the issues in respect of the transfer pricing are restored to the file of the Assessing Officer for re-computation.
12. In respect of Grounds No. 7 & 8, it was submitted by the ld. Sr. Counsel that they are general in nature and do not need any adjudication.
13. In respect of Grounds No. 9 to 15, it was submitted that these were against additions representing corporate additions. It was the submission that the assessee was unable to produce all evidences in relation to these additions before the Assessing Officer in the course of original assessment, as the assessee has been demerged and the Head Office of the company, which was earlier situated at Kolkata, was shifted to Bangalore and the employees, who were on the pay role of the assessee, had resigned and the balances were rel ocated to Bangalore. Also while shifting the office, many documents were misplaced and not traceable. The assessee has filed a petition under Rule 29 of the Income Tax Appellate Tribunal Rules for admission of substantial number of additional evidences. It was the submission that the issues in Grounds 9 to 15 of the assessee's appeal may be restored to the file of the Assessing Officer for re-adjudication as the assessee was now in a position to produce all required evidences. In reply, l d. CIT D.R. admitted that the assessee could be granted another opportunity.
14. We have considered the submissions as also the application under Rule 29 of the ITAT Rules. A perusal of the evidences clearly shows that substantial numbers of additional evidences running into more than nearly 430 pages have been produced as additional evidences. These evidences need to be verified by the Assessing Officer. Consequentl y, as it is noticed that the assessee has shown justifiable reasons for non- production of the evidences before the Assessing Officer in the course of original assessment, the issues in Grounds No. 9 to 15 of the assessee's I .T.A . N o . 1 8 4 8 / Kol. / 2 0 1 2 A s s es s m en t ye ar : 2 0 0 8 - 2 0 0 9 Page 15 of 15 appeal are restored to the file of the Assessing Officer for re-adjudication after granting the assessee adequate opportunity of being heard.
15. Ground No. 16 is against levy of interest under section 234B and 234D, which is consequential in nature.
16. Ground No. 17 is again general in nature and does not need any adjudication.
17. In the result, the appeal of the assessee is partly allowed for statistical purposes.
Order pronounced in the open Court on 09 t h July, 2014.
Sd/- Sd/-
Shamim Yahya George M athan
(Accountant Member) (Judicial Member)
Kolkata, the 09 t h day of July, 2014
Copies to : (1) Datex Ohmed a (I) Pv t. Ltd.
(Since me rge d with Wipro GE Heathcare Priv ate Ltd.) , 3, Preto ri a Stree t, 3 r d Floo r, Kolkata-700 020 (2) Deputy Commissione r of Income Tax Circle-2, Kolkata , Aayaka r Bhawan, P-7, Chowringhee Squa re , 7 t h Floor, Kolkata-700 069 (3) Commissioner of Inco me-tax (Appeals) (4) Commissioner of Income Tax (5) The Departmental Representative (6) Guard File By o rder Assistant Registrar Income Tax Appellate Tribunal Kolkata benches, Ko lkata Laha/Sr. P.S.