M/s. CSR Technology (India) Pvt. Ltd., Noida V. ACIT, New Delhi

ITA 1895/DEL/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2938 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2012-2013
• Appeal Filed On: 30-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEERAJ KUMAR SENIOR
• Assessee Lawyers: SUVINAY KUMAR DASH S
• Keywords: Related party transaction; Business income; Transfer pricing; International transaction
• Section: 92C; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH I : NEW DELHI) BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.1895/DEL./2017 (ASSESSMENT YEAR : 2012-13) M/S. CSR TECHNOLOGY (INDIA) PVT. LTD., VS. ACIT, ADVANT NAVIS BUSINESS PARK, CIRCLE 6 (2), B 502, 5 TH FLOOR, TOWER B, NEW DELHI. PLOT NO.7, SECTOR 142, NOIDA 201 305. (PAN : AAHCS9583J) (APPELLANT) (RESPONDENT) ASSESSEE BY : S/SHRI G.C. SRIVASTAVA, DIVYANSHU AGGARWAL & SUVINAY KUMAR DASH, ADVOCATES REVENUE BY : SHRI NEERAJ KUMAR, SENIOR DR DATE OF HEARING : 14.11.2017 DATE OF ORDER : 14.12.2017 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT, M/S. M/S. CSR TECHNOLOGY (INDIA) PR IVATE LIMITED (HEREINAFTER REFERRED TO AS THE TAXPAYER) BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORD ER DATED 27.01.2017, PASSED BY THE AO IN CONSONANCE WITH THE ORDERS PASSED BY THE LD. CIT (A)/TPO UNDER SECTION 143 (3) READ WITH ITA NO.1895/DEL/2017 2 SECTION 144C OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) QUA THE ASSESSMENT YEAR 2012-13 ON THE GROUNDS INTER AL IA THAT :- I. TRANSFER PRICING THE GROUNDS MENTIONED HEREINAFTER ARE WITHOUT PREJUDICE TO ONE ANOTHER. 1. THE LEARNED ASSESSING OFFICER ('LEARNED AO'), LEARNED TRANSFER PRICING OFFICER ('LEARNED TPO') AN D THE HONOURABLE DISPUTE RESOLUTION PANEL ('HON'BLE DRP') GROSSLY ERRED IN DETERMINING AN ADJUSTMENT OF INR 2,82,48,956/- WITH RESPECT TO THE INTERNATIONAL TRANSACTION RENDERED BY THE TAXPAYER U/S 92CA OF TH E INCOME-TAX ACT, 1961. 2. THE LEARNED AO/TPO/DRP WHILE PROPOSING THE ADJUSTMENT HAS ERRED IN: IGNORING THE BUSINESS MODEL FOLLOWED BY THE ASSESSEE FOR THE SERVICES RENDERED TO ASSOCIATED ENTERPRISE ('AE') VIS-A-VIS NON-AES; DISREGARDING THE SEGMENTAL RESULTS OF THE ASSESSEE AND THEREBY PROCEEDING TO CONSIDER THE MARGIN OF THE ASSESSEE AT THE ENTITY LEVEL FOR THE TRANSFER PRICING ANALYSIS. 3. WITHOUT PREJUDICE TO THE OTHER CONTENTIONS OF TH E APPELLANT, THE LD. AO/LD. TPO HAS FAILED TO APPRECI ATE THAT THE INTERNATIONAL TRANSACTIONS ARE ARM'S LENGT H EVEN BASED ON THE FRESH COMPARABILITY ANALYSIS AS P ER THE DIRECTIONS OF HON'BLE DISPUTE RESOLUTION PANEL ('DRP'), IF SEGMENTAL RESULT PERTAINING TO AE TRANSACTIONS IS CONSIDERED. 4. THE LEARNED AO / LEARNED TPO / HON'BLE DRP ERRED IN REJECTING THE TP DOCUMENTATION MAINTAINED BY THE APPELLANT BY INVOKING PROVISIONS OF SUB-SECTION (3) OF 92C OF THE ACT. ITA NO.1895/DEL/2017 3 5. THE LEARNED AOI LEARNED TPO/ HON'BLE DRP ERRED IN REJECTING COMPARABILITY ANALYSIS CARRIED I N THE TP DOCUMENTATION AND IN CONDUCTING A FRESH COMPARABILITY ANALYSIS BY INTRODUCING VARIOUS FILTE RS WHILE DETERMINING THE ARM'S LENGTH PRICE ('ALP'). 6. THE LEARNED AO/LEARNED TPO ERRED IN APPLYING ADDITIONAL FILTERS AND REJECTING/MODIFYING FILTERS APPLIED BY THE APPELLANT FOR DETERMINATION OF THE ARM'S LEN GTH PRICE WHILE CARRYING OUT A FRESH COMPARABILITY ANAL YSIS 7. THE LEARNED AO/ LEARNED TPOI HON'BLE DRP ERRED IN NOT CONSIDERING THE PREVIOUS TWO YEARS FINANCIAL DATA OF THE COMPARABLE COMPANIES WHILE DETERMINING THE ALP. 8. THE LEARNED AO/ LEARNED TPOI HON'BLE DRP ERRED IN APPLYING DIFFERENT FINANCIAL YEAR ENDING F ILTER WHILE SELECTING THE COMPARABLE COMPANIES. 9. THE LEARNED AO/ LEARNED TPOI HON'BLE DRP ERRED IN NOT CONSIDERING THE FACT THAT THE RELEVANT DATA FOR THE CONCERNED FINANCIAL YEAR COULD BE DEDUCED F ROM THE INFORMATION AVAILABLE ON PUBLIC DOMAIN. 10. THE LEARNED AO/LEARNED TPO/HON'BLE DRP ERRED IN APPLYING EXPORT EARNING FILTER OF 75% INSTEAD OF 25% OF THE TOTAL SALES, LEADING TO A NARROWER COMPARABL E SET. 11. THE LEARNED AOI LEARNED TPO/ HON'BLE DRP HAS ERRED IN CONSIDERING 25% AS THE THRESHOLD LIMIT FOR RELATED PARTY TRANSACTIONS ('RPT') FILTER, WITHOUT GIVING ANY COGENT REASON. 12. THE LEARNED AOI LEARNED TPO/ HON'BLE DRP ERRED IN NOT APPLYING THE UPPER LIMIT ON TURNOVER W HILE SELECTING THE COMPARABLE COMPANIES. 13. THE LEARNED AO/LEARNED TPO/ HON'BLE DRP ERRED IN NOT APPRECIATING THE FACT THAT SINCE THE L OWER LIMIT ON TURNOVER HAS ALREADY BEEN APPLIED MUTUALLY BY THE APPELLANT AS WELL AS THE LEARNED TPO WHILE CARR YING OUT THEIR RESPECTIVE COMPARABILITY ANALYSIS, UPPER LIMIT ITA NO.1895/DEL/2017 4 ON TURNOVER SHOULD ALSO HAVE BEEN PROVIDED BASED ON THE SIMILAR PRINCIPLE. 14. THE LEARNED AO/ LEARNED TPO/ HON'BLE DRP ERRED IN ACCEPTING COMPANIES THAT DO NOT QUALIFY TH E COMPARABILITY CRITERIA AND OUGHT TO HAVE BEEN REJEC TED: INFOSYS LTD. CELSTREAM TECHNOLOGIES LTD. THIRDWARE SOLUTIONS LTD. TATA ELXSI LTD. ZYLOG SYSTEMS (INDIA) LTD. LUCID SOFTWARE LTD. PERSISTENT SYSTEMS LTD. LARSEN & TOUBRO LTD. SPRY RESOURCES PVT. LTD. 15. THE LEARNED AOI LEARNED TPOI HON'BLE DRP ERRED IN REJECTING COMPANIES THAT OUGHT TO HAVE BEE N ACCEPTED AS COMPARABLE: CAT TECHNOLOGIES LTD. HELIOS & MATHESON INFORMATION TECHNOLOGY LTD. 16. THE LEARNED AOI LEARNED TPOI HON'BLE DRP ERRED IN NOT ALLOWING APPROPRIATE ADJUSTMENT TOWARD S THE RISK DIFFERENCE BETWEEN THE APPELLANT VIS-A-VIS THE COMPARABLE COMPANIES. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : CSR TECHNOLOGY INDIA (PRI VATE) LIMI8TED, THE TAXPAYER, EARLIER KNOWN AS SIRF TECHN OLOGY INDIA PRIVATE LIMITED IS A SUBSIDIARY OF CSR INC., A GROU P COMPANY OF CSR, ENGAGED IN THE PROVISION OF SOFTWARE DEVELOPME NT SERVICES TO CSR INC. UNDER A RESEARCH & DEVELOPMENT AGREEMENT WITH CSR INC., CSR TECHNOLOGY UNDERTAKES SOFTWARE DEVELOPMEN T SERVICES ITA NO.1895/DEL/2017 5 EXCLUSIVELY FOR CSR INC. DURING THE YEAR UNDER ASS ESSMENT, THE TAXPAYER ENTERED INTO INTERNATIONAL TRANSACTIONS WI TH ITS ASSOCIATED ENTERPRISES (AE) AS UNDER :- S.NO. TYPE OF INTERNATIONAL TRANSACTION METHOD SELECTED TOTAL VALUE OF TRANSACTION (RS.) MAM PLI I. PROVISION FOR SOFTWARE DEVELOPMENT SERVICES TRANSACTIONAL NET MARGIN METHOD (TNMM) OPERATING PROFIT/ OPERATING COST (OP/OC) 98,789,879 II. PAYMENT IN RESPECT OF IMPORT OF CAPITAL GOODS TNMM OP/OC 396,052 III. REIMBURSEMENT OF EXPENSES TNMM OP/OC 529,616 3. TRANSFER PRICING OFFICER (TPO) FOUND THE FUNCTIO N OF THE TAXPAYER AND ITS AE AS EXPLAINED IN THE TP REPORT B Y THE TAXPAYER IN ORDER. THE TAXPAYER USED TRANSACTIONAL NET MARG IN METHOD (TNMM) AS THE MOST APPROPRIATE METHOD (MAM), OPERAT ING PROFIT/ OPERATING COST (OP/OC) AS THE PROFIT LEVEL INDICATOR (PLI) AND CALCULATED ITS MARGIN AT 16.88%. TPO HAS NOT D ISPUTED THE TNMM METHOD ADOPTED BY THE TAXPAYER. HOWEVER, TPO NOTICED THAT THE TAXPAYER HAS BIFURCATED ITS FUNCTION IN AE AND NON-AE SEGMENT WHILE CALCULATING THE MARGIN WHEREAS TRANSA CTION WITH NON-AE SEGMENT IS MINUSCULE AS AGAINST AE TRANSACTI ON AND HENCE, ITA NO.1895/DEL/2017 6 RECAST THE ACCOUNT AT ENTITY LEVEL AND CALCULATED T HE OP/OC AT MINUS 9.92% BY ADOPTING TNMM AS THE MOST APPROPRIAT E METHOD. TPO PROPOSED TO TAKE 17 COMPARABLES HAVING AVERAGE OF 20.92%. AFTER CONSIDERING THE OBJECTIONS RAISED BY THE TAXP AYER, ULTIMATELY TPO SELECTED 12 COMPARABLES HAVING AVERAGE OF 18.18 % AND PROPOSED THE PROPORTIONATE ADJUSTMENT OF RS.30,815, 175,17. 4. THE TAXPAYER CARRIED THE MATTER BY WAY OF RAISIN G OBJECTIONS BEFORE THE LD. DRP, WHICH HAVE BEEN DISPOSED OFF. FEELING AGGRIEVED, THE TAXPAYER HAS COME UP BEFORE THE TRIB UNAL BY WAY OF FILING THE PRESENT APPEAL. 5. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. AT THE VERY OUTSET, THE LD. AR FOR THE TAXPAYER CONTENDED THAT GROUND NO.2 IS THE ONLY EFFECTIVE GROUND AND REST O F THE GROUNDS WOULD BECOME ACADEMIC. GROUND NO.2 7. FIRST CONTENTION RAISED BY LD. AR FOR THE TAXPAY ER THAT THE TPO HAS IGNORED THE BUSINESS MODEL OF THE TAXPAYER WHILE PROVIDING SERVICES TO BOTH AE AND NON-AE AND THEREA FTER ERRED IN ITA NO.1895/DEL/2017 7 DISREGARDING THE SEGMENTAL RESULT OF THE TAXPAYER A ND PROCEEDED TO CONSIDER THE MARGIN OF THE TAXPAYER AT THE ENTITY L EVEL FOR TP ANALYSIS. TPO IN PRINCIPLE HAS NOT REJECTED TWIN F OLD BUSINESS MODEL OF THE TAXPAYER : ONE, IN CASE OF AE, FIXED C OST PLUS MARK UP IS ASSURED FOR THE SERVICES RENDERED WHEREAS IN CAS E OF NON-AE, NO ASSURED PROFIT FOR THE TAXPAYER IS THERE FOR PROVID ING SERVICES. TPO HAS REJECTED THE SEGMENTAL INFORMATION OF THE TAXPA YER MERELY ON THE GROUND THAT TRANSACTION WITH NON-AE IS MINUSCUL E. TPO HAS NOT RAISED ANY QUERY AS TO SEGMENTAL RESULT NOR HAS CONSIDERED THE REPLY FILED BY THE TAXPAYER GIVING COMPLETE DETAIL, WHICH WERE ALSO BEFORE THE LD. DRP. LD. AR RELIED UPON THE DECIS IONS RENDERED BY THE COORDINATE BENCH OF THE TRIBUNAL IN LG ELECTRONICS INDIA PRIVATE LTD. VS. ACIT IN ITA NO.5140/DEL/2011 AND H ONEYWELL ELECTRICAL DEVICES & SYSTEMS INDIA LTD. VS. ACIT (2014) 29 ITR (T) 347 (CHENNAI TRIB.) 8. HOWEVER, THE LD. DR FOR THE REVENUE IN ORDER TO REPEL THE CONTENTION RAISED BY THE TAXPAYER SUPPORTED THE DEC ISION OF AO/TPO/DRP IN DISREGARDING THE SEGMENTAL RESULT OF THE TAXPAYER CONTENDED INTER ALIA THAT WHEN THE TAXPAYER IS PROV IDING SIMILAR SERVICES TO THE AE AS WELL AS NON-AE, THERE CANNOT BE ANY NON- ALLOCATION KEY AND THE TAXPAYER HAS MADE ARTIFICIAL BIFURCATION ONLY TO RAISE THE PROFIT; THAT WHEN THE TAXPAYER IS DOIN G SAME BUSINESS ITA NO.1895/DEL/2017 8 WITH AE AND NON-AE, ONLY LOGICAL CONCLUSION IS THAT SAME EMPLOYEES ARE DOING WORK FOR PROVIDING SERVICES TO AE AND NON- AE; THAT NO AUDITED ACCOUNT WITH DETAIL HAS BEEN GI VEN; THAT DECISION RENDERED BY THE COORDINATE BENCH OF THE TR IBUNAL IN LG ELECTRONICS INDIA PRIVATE LTD. AND HONEYWELL ELECTR ICAL DEVICES & SYSTEMS INDIA LTD. (SUPRA) ARE NOT APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 9. IN THE BACKDROP OF THE AFORESAID FACTS AND CIRCU MSTANCES OF THE CASE, THE FIRST QUESTION ARISES FOR DETERMINATI ON IN THIS CASE IS:- AS TO WHETHER TPO/DRP HAVE ERRED IN DISREGARDING THE SEGMENTAL INFORMATION PROVIDED BY THE TAXPAYER FOR THE REASON THAT THE SAME IS NOT AUDITED ONE? 10. WHEN WE SEEK THE ANSWER OF THE AFORESAID QUESTI ON IN THE LIGHT OF THE FACT THAT THERE IS NO DISPUTE IN APPLY ING THE TNMM AS THE MOST APPROPRIATE METHOD AND THERE IS NO NEED TO GO INTO THE COMPARABLES, THE IDENTICAL QUESTION HAS ALREADY BEE N DETERMINED BY THE SPECIAL BENCH OF THE TRIBUNAL IN CASE CITED AS M/S. LG. ELECTRONICS INDIA PRIVATE LIMITED (SUPRA) IN FAVOUR OF THE ASSESSEE BY RETURNING THE FOLLOWING FINDINGS :- 21.5 . IT IS UNDISPUTED THAT UNDER THE TNMM, IT IS ALWAYS THE OPERATING PROFIT FROM THE CONCERNED INTERNATIONAL TRANSACTION THAT IS VIEWED IN RELATIO N TO THE TOTAL COST, SALES OR CAPITAL EMPLOYED ETC. OF T HAT INTERNATIONAL TRANSACTION. IT IS NOT AS IF THE PERC ENTAGE OF THE MARGIN IS TO BE DETERMINED BY CONSIDERING TH E NET ITA NO.1895/DEL/2017 9 PROFIT OF THE ENTITY IN RELATION TO THE TOTAL SALES OF THE ENTITY. WHEN WE CONSIDER OPERATING PROFIT TO TOTAL COSTS OF AN INTERNATIONAL TRANSACTION, ALL THE ITEMS OF N ON- OPERATING EXPENSES AND NON-OPERATING INCOME QUA SUC H INTERNATIONAL TRANSACTION ARE LIABLE TO BE EXCLUDED . THE CORRECT APPROACH UNDER THE TNMM IS TO CONSIDER THE OPERATING PROFIT FROM EACH INTERNATIONAL TRANSACTIO N IN RELATION TO THE TOTAL COST OR SALES OR CAPITAL EMPL OYED ETC. OF SUCH INTERNATIONAL TRANSACTION AND NOT THE NET P ROFIT, TOTAL COSTS, SALES, CAPITAL EMPLOYED OF THE ASSESSE E AS A WHOLE ON ENTITY LEVEL. SECTION 92C UNEQUIVOCALLY PROVIDES THAT THE ALP IN RELATION TO 'AN' INTERNATI ONAL TRANSACTION SHALL BE DETERMINED BY ANY OF THE PRESC RIBED METHODS. IN TURN, RULE 10B(1)(E) ALSO TALKS OF THE NET PROFIT MARGIN REALIZED BY THE ENTERPRISE FROM 'AN' INTERNATIONAL TRANSACTION. WHEN THE MANDATE OF THE SECTION AND THE RELEVANT RULE IS UNAMBIGUOUS SO AS TO APPLY ON EACH TRANSACTION, AS IS APPARENT FROM THE USE OF THE ARTICLE 'AN', THEN THE COMPUTATION OF THE AL P OF 'AN' INTERNATIONAL TRANSACTION ON THE ENTITY LEVEL IS INAPPROPRIATE. OUR CONCLUSION THAT EACH INTERNATION AL TRANSACTION IS REQUIRED TO BE SEPARATELY SCRUTINIZE D UNDER CHAPTER-X ALSO BECOMES APPARENT FROM THE LANGUAGE OF SECTION 92(3) AS DISCUSSED INFRA. THUS , IT IS CLEAR THAT THE SANCTION IS FOR APPLYING THE TNMM ON LY ON A TRANSACTIONAL LEVEL AND NOT ON ENTITY LEVEL. O F COURSE, THE TNMM CAN BE CORRECTLY APPLIED ON ENTITY LEVEL IF ALL THE INTERNATIONAL TRANSACTIONS ARE OF SALE BY THE ASSESSEE TO ITS FOREIGN AE AND THERE IS NO OTHE R TRANSACTION OF SALE TO ANY OUTSIDER AND ALSO THERE IS NO OTHER INTERNATIONAL TRANSACTION. BUT IF THERE ARE S EVERAL UNRELATED INTERNATIONAL TRANSACTIONS, AS IS THE CAS E BEFORE US AND THE ASSESSEE OR THE TPO HAS APPLIED T HE TNMM IN A WRONG MANNER ON ENTITY LEVEL FOR TESTING ANY OF SUCH TRANSACTIONS, THEN THE REMEDY LIES IN CORRECTING SUCH MISTAKE RATHER THAN DRAWING LEGALLY UNSUSTAINABLE CONCLUSIONS BY TAKING SUCH MISTAKE AS A CORRECT LEGAL POSITION. 11. HOWEVER, COORDINATE BENCH OF THE TRIBUNAL IN AS M/S. LG. ELECTRONICS INDIA PRIVATE LIMITED (SUPRA) CASE HELD THAT THE ITA NO.1895/DEL/2017 10 SANCTION IS FOR APPLYING THE TNMM ONLY AT TRANSACTI ONAL LEVEL AND NOT ON ENTITY LEVEL. IT IS FURTHER HELD THAT TNMM CAN BE CORRECTLY APPLIED ON ENTITY LEVEL IF THE INTERNATIONAL TRANSA CTIONS ARE ON SALE BY THE TAXPAYER TO ITS FOREIGN AE AND THERE IS NO O THER INTERNATIONAL TRANSACTION OF SALE TO ANY OUTSIDER AND ALSO THERE IS NO OTHER INTERNATIONAL TRANSACTION. IN THE INSTANT CASE, UN DISPUTEDLY, THERE IS NO OTHER INTERNATIONAL TRANSACTION. THE TAXPAYER H AS ONLY MINUSCULE TRANSACTION WITH NON-AE, THE BIFURCATION OF WHICH HAS BEEN GIVEN AT PAGES 566 & 567 OF THE PAPER BOOK. D ETAIL AVAILABLE AT PAGE 567 OF THE PAPER BOOK INCLUDES INTER ALIA T HE NAME OF THE EMPLOYEES, THE MONTH-WISE PAYMENT FOR THE WORK EXCL USIVELY DONE FOR NON-AE/DOMESTIC ENTERPRISES. ALL THESE DETAILS WERE AVAILABLE BEFORE LD. TPO WHO HAS NOT RAISED ANY QUERY. THIS DETAIL WAS ALSO AVAILABLE BEFORE THE DRP BUT HAS NOT BEEN CONSIDERE D IN THE RIGHT PERSPECTIVE. 12. NOW, THE NEXT QUESTION ARISES FOR DETERMINATION IS :- AS TO WHETHER SEGMENTAL RESULTS CAN BE REJECTED FO R NON AUDITING THE SAME? 13. IN CASE CITED AS HONEYWELL ELECTRICAL DEVICES & SYSTEMS INDIA LTD. (SUPRA), THE COORDINATE BENCH OF THE TRIBUNAL BY RE LYING UPON THE CASE OF 3I INFOTEC LTD. VS. ITO (2013) 35 TXMANN.COM 582 (CHENNAI) RENDERED BY THE TRIBUNAL HELD THAT EVEN IF SUCH ITA NO.1895/DEL/2017 11 SEGMENTAL RESULTS ARE NOT SHOWN IN THE AUDITED FINA NCIAL ACCOUNTS, THEY HAVE TO BE ACCEPTED. THE COORDINATE BENCH OF THE TRIBUNAL IN 3I INFOTEC LTD. (SUPRA) HELD AS UNDER :- 29. ..BEFORE US ALSO, THE LD. CIT/DR COULD NOT PO INT OUT ANY SPECIFIC DEFECT IN THIS WORKING OF THE ASSE SSEE. THE ONLY ARGUMENT OF THE DEPARTMENT IS THAT THE SEGMENT WISE WORKING MADE BY THE ASSESSEE IS NOT AUDITED. IN OUR CONSIDERED VIEW, THERE IS NO LEGAL REQUIREMENT THAT THE SEGMENT WISE WORKING SUBMITTED BEFORE THE TPO SHOULD BE AUDITED BY THE ASSESSEES CA. MOREOVER, IT IS NOT OPEN TO THE REVENUE TO REJECT T HE WORKING PREPARED BY THE ASSESSEE 14. COORDINATE BENCH OF THE TRIBUNAL IN CASE CITED AS LUMMUS TECHNOLOGY HEAT TRANSFER BV (ITA NO.6227/DEL/2012) , AVAILABLE AT PAGE 441 OF THE PAPER BOOK, ALSO HELD THAT SEGME NTAL RESULTS CANNOT BE REJECTED ON THE GROUND THAT THE SAME ARE NOT AUDITED. TPO/DRP WAS REQUIRED TO EXAMINE THE SAME IF THE SAM E WERE MAINTAINED IN THE ORDINARY COURSE OF BUSINESS. 15. MORE SO, THE TPO WAS HAVING COMPLETE OPPORTUNI TY TO EXAMINE THE SEGMENTAL RESULT OTHERWISE AVAILABLE AT PAGE 564 OF THE PAPER BOOK GIVING COMPLETE FINANCIAL OF AE AND NON- AE BUT THE TPO HAS SIMPLY REJECTED THE SEGMENTAL RESULT BY CIT ING REASON THAT TRANSACTION WITH NON-AE IS MINUSCULE. SO, WE ARE O F THE CONSIDERED VIEW THAT SEGMENTAL BIFURCATION NEED NOT BE AUDITED RATHER IT IS FOR THE TPO TO EXAMINE THE SAME PARTIC ULARLY WHEN ITA NO.1895/DEL/2017 12 SUBMITTED IN DETAIL BY THE TAXPAYER. MOREOVER ENTIT Y LEVEL PROFIT CANNOT BE TAKEN FOR TP ANALYSIS UNLESS ALL THE TRAN SACTIONS ARE WITH AE. 16. COORDINATE BENCH OF THE TRIBUNAL IN SYSARRIS SOFTWARE (INDIA) PVT. LTD. (IT(TP)A.NO.639/BANG/2012) , AVAILABLE AT PAGE 441 OF THE PAPER BOOK, WHILE DECIDING THE IDENTICAL ISSUE HELD THAT WHEN THERE ARE INTERNATIONAL TRANSACTIONS OF THE TA XPAYER WITH AE ONLY INTERNATIONAL TRANSACTIONS ARE TO BE ADJUSTED FOR ALP ADJUSTMENT. IN THE INSTANT CASE ALSO, TRANSACTION OF THE TAXPAYER WITH NON-AE WITH WHICH IT IS OPERATING ON DIFFERENT MODEL ARE NOT TO BE TAKEN FOR BENCHMARKING THE INTERNATIONAL TRAN SACTION. 17. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, WE AR E OF THE CONSIDERED VIEW THAT AO/TPO/DRP HAVE ERRED IN DISRE GARDING THE SEGMENTAL RESULT OF THE TAXPAYER BY PROCEEDING TO C ONSIDER THE MARGIN OF THE TAXPAYER AT THE ENTITY LEVEL FOR THE TRANSFER PRICING ANALYSIS. SO, BY ACCEPTING THE TNMM AS THE MOST AP PROPRIATE METHOD AND IN THE FACE OF THE FACT THAT THE TAXPAYE R WAS HAVING SEPARATE INTERNATIONAL TRANSACTION WITH ITS AE, THE ALP OF THE SAME IS TO BE DETERMINED WHEREAS ALP OF THE OTHER TRANSA CTIONS OF THE TAXPAYER WITH NON-AE IS NOT TO BE CONSIDERED. 18. EVEN OTHERWISE, TP ADJUSTMENT IS NOT POSSIBLE W ITHOUT TAKING INTO ACCOUNT THE SEGMENTAL RESULT. AS SUCH, TPO/DRP ITA NO.1895/DEL/2017 13 CANNOT UNILATERALLY ADOPT ENTITY LEVEL RESULT IN DE TERMINING THE ALP OF INTERNATIONAL TRANSACTION. SO, IN THESE CIRCUMS TANCES, TP ADJUSTMENT MADE BY THE AO/TPO/DRP BY TAKING THE MAR GIN OF THE TAXPAYER AT ENTRY LEVEL FOR TP ADJUSTMENT IS NOT SU STAINABLE, SO WE HEREBY REMAND BACK THE CASE TO THE TPO TO DECIDE AF RESH AFTER CONSIDERING SEGMENTAL RESULT OF THE TAXPAYER FOR TP ANALYSIS. 19. RESULTANTLY, THE APPEAL FILED BY THE TAXPAYER I S ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THIS 14 TH DAY OF DECEMBER, 2017. SD/- SD/- (B.P. JAIN) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 14 TH DAY OF DECEMBER, 2017 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT (A) 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.