Appeal allowed for statistical purposes, remitted to Assessing Officer for reconsideration.

The appeal was allowed for statistical purposes, and the entire issue was remitted back to the Assessing Officer for reconsideration in accordance with the law, providing the assessee with a reasonable opportunity to present their case.

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Issues:
Transfer pricing adjustment based on Transaction Net Margin Method, Customs duty payment adjustment, working capital employed adjustment.

Transfer Pricing Adjustment:
The appeal concerns the assessment year 2010-11, where the assessee, a subsidiary of a Korean corporation, engaged in manufacturing automotive air conditioning systems, faced transfer pricing adjustments by the Transfer Pricing Officer and the Dispute Resolution Panel. The assessee maintained transfer pricing documentation using the Transaction Net Margin Method for transactions with its Associate Enterprise. The contention was that Customs duty paid for importing raw material and capital assets should be considered in transfer pricing adjustments. The Dispute Resolution Panel upheld the Transfer Pricing Officer's decision, which did not allow Customs duty payment adjustment. The assessee argued that the statistical method adopted by the authorities was not justified, advocating for the Transaction Net Margin Method as the most appropriate.

Customs Duty Payment Adjustment:
The dispute also involved the Customs duty payment adjustment. The assessee imported a significant portion of raw material, incurring additional Customs duty costs. The Transfer Pricing Officer determined a downward adjustment due to the high cost of imports and the inability to pass on Customs duty to customers. The Dispute Resolution Panel confirmed the decision, citing the need to consider only the current year data of comparable companies for comparison. The assessee argued that the adjustment for Customs duty payment was essential to neutralize the comparison with established companies that did not face similar import costs.

Working Capital Employed Adjustment:
Regarding the working capital employed adjustment, the Dispute Resolution Panel did not consider it necessary since the comparison was made at the gross profit margin level. The authorities relied on the decision in the assessee's own case for the assessment year 2009-10. However, the Tribunal found that the matter needed reconsideration, similar to the earlier case, and remitted the issue back to the Assessing Officer for a fresh determination, emphasizing the importance of following the prescribed methods under Section 92C of the Income-tax Act, 1961.

In conclusion, the appeal was allowed for statistical purposes, and the entire issue was remitted back to the Assessing Officer for reconsideration in accordance with the law, providing the assessee with a reasonable opportunity to present their case.

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