Decided on November 13,2014



R.S.Syal, Member (A) - (1.) THIS appeal by the Revenue arises out of the order passed by the CIT(A) 29.11.2010 in relation to the assessment year 2004 -05.
(2.) THE only issue raised in this appeal is against the deletion of addition of Rs. 45,41,519/ - on account of transfer pricing adjustment. Briefly stated, the facts of the case are that Exxon Mobil is a multi -national group of companies engaged in oil and gas industry. It conducts business in almost 200 countries. Its major business is to discover, access, develop, refine and market oil and gas resources. The assessee, an Indian company, is part of this group, which conducts market survey activities and renders related advisory services to its associated enterprises (AEs). Four international transactions were reported by the assessee in its Form No. 3CEB. The only international transaction disputed in the present appeal is 'Conducting market survey activities and related advisory services' for which the assessee was paid Rs. 4,89,60,262/ -. The other three international transactions were accepted by the TPO at arm's length price (ALP). The assessee adopted Transactional net margin method (TNMM) as the most appropriate method, with Profit level indicator (PLI) of Operating Profit to Total Cost (OP/TC), to demonstrate that the international transaction was at arm's length price. Twelve companies were selected by the assessee as comparable. By adopting the multiple -year data of these companies, the assessee computed their average operating profit margin at 4.46% and, accordingly, showed that its international transaction was at ALP. The TPO rejected the use of multiple -year data and resorted to the current year data alone. In doing so, he noticed that only eight companies were left out of those twelve chosen by the assessee because the current year data of the remaining four companies was not available. The TPO computed average of OP/TC margin of these eight companies for the financial year 2003 -04, at 17.96%. By applying this profit margin, a transfer pricing adjustment of Rs. 45,41,519/ - was proposed, which amount was added by the AO in the assessment order.
(3.) AT this juncture, it is pertinent to mention that there is no dispute on any aspect of the addition on account of transfer pricing adjustment other than the calculation of OP/TC margin of Engineers India Ltd. (EIL), one of the companies chosen by the assessee as comparable in its transfer pricing study by showing its margin of 37.41% for the current year, which stood adopted by the TPO as such without any alteration.;

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