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b) by stating that no Functions, Asset and Risk analysis of the Appellant and its Associated Enterprises ('AEs') was submitted by the Appellant;
c) by stating that the Appellant is not a mere commission agent but is also engaged in the business of developing market for the AE and servicing the installations of the AE despite the fact that no such submission has been filed by the Appellant;
d) by applying the Profit Split Method ('PSM') without analyzing whether the PSM is the most appropriate method in facts of the Appellant's transaction pertaining to receipt of direct sales compensation;
Support service provider Service recipient Rate of DSC York Philippines Inc, York International 2% Philippines Pte. Ltd.
Singapore York Air Conditioning and York International 2% Refrigeration (Thailand) Ptd. Limited, Co. Ltd., Thailand Singapore The TPO, however, being of the view that as the agreements relied upon by the assessee were with the group entities itself, which could not be taken as a comparable uncontrolled transaction, thus declined to take cognizance of the same. The TPO further rejecting the benchmarking analysis conducted by the assessee, as per which it was claimed that in the case of indenting the CUP method was the most appropriate method, therein adopted the Profit Split Method ('PSM') as the most appropriate one and 50% of the said profit on the transactions was considered appropriate. The TPO thus quantified the ALP of the commission @ 10.64% of sales, and as such quantified the relatable profits at Rs. 12,11,54,110/-. The net TP adjustment suggested by the TPO thus worked out to Rs. 9,83,80,781/-.
(i) As regards the TP adjustment of Direct Sales Compensation (DSC) of Rs.9,83,80,781/-:
The DRP after deliberating on the objections raised by the assessee in respect of the upward TP adjustment of Rs.9,83,80,781/- proposed by the TPO u/s 92CA(3) of the 'Act', therein dealt with the same as under:-
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(a). The assessee objected to the rejection by the TPO of the method which was adopted to benchmark transactions pertaining to receipt of DSC. The DRP observed that though as per the terms of the agreement remuneration to the assessee was fixed at 2% of the sales, however, as claimed by the assessee that it was not merely a commission agent, but was also engaged in the business of developing market for the AEs and servicing their installations in India, therefore, observed that the TPO had rightly concluded that the assessee had not benchmarked the compensation @ 2% correctly. The DRP observed that as the two instances of commission relied upon by the assessee were transactions between group companies and therefore, were controlled transactions, the same had rightly not been considered by the TPO to benchmark the AEs transactions. The DRP further upheld the rejection of the CUP method, and adoption of the Profit Split Method ('PSM') to benchmark the transactions. The DRP further observed that in the absence of FAR of assessee and its AEs, the splitting of 50% profit in the hands of the assessee could not be faulted with.

(c). The DRP dealing with the objection of the assessee that the TPO had erred in applying the Profit Split Method ('PSM') without analyzing as to whether the same was an appropriate method as regards receipt of DSC, as well as had most arbitrarily carried out cherry picking of sample invoices without taking into consideration the functions assumed, assets utilized, and the risks assumed by the assessee and the AEs, therein observed that the TPO had in all fairness going by the fact that it was impossible to analyze the entire population, had thus carried out random selection of data, which could safely be held to be well established and scientific statistical procedure. It was further observed by the DRP that in case the assessee was not satisfied with the randomness of the data, which in any case was not picked up by the TPO but was offered by the assessee itself, then it was open to the assessee to have challenged the adoption of the said data before the TPO, which however was never done. The DRP finally concluded that as the assessee had not done any FAR of its AEs and of itself, therefore, in the absence of the relevant documents and information, it was impossible for the TPO to have done the same. The DRP thus on the basis of his aforesaid observations, therefore, dismissed the objection of the assessee as regards adoption of the Profit Split Method ('PSM') for determining the arm's length of the Direct Sales Compensation ('DSC') by the assessee.