Transfer pricing benchmarking and appellate indexation claims were addressed with relief for the assessee on both issues.

Transfer pricing benchmarking for freight paid to an associated enterprise must follow the actual shipment date and the exchange rate prevailing then, because the international transaction is realised on shipment rather than on the contractual promise; the adjustment was deleted on that basis. A statutory claim for indexation in long-term capital gains may be entertained at the appellate stage even if not raised in the original return or computation, because the restriction in Goetze (India) Ltd. applies to the assessing authority and not to appellate authorities; the claim was directed to be verified and allowed subject to computation.

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Issues: (i) Whether the transfer pricing adjustment on freight payments to an associated enterprise was sustainable where benchmarking was required to be done with reference to actual quantity shipped and the exchange rate prevailing on the shipment date; (ii) Whether the assessee was entitled to claim indexation while computing long-term capital gains, though the claim was raised for the first time before the appellate authority.

Issue (i): Whether the transfer pricing adjustment on freight payments to an associated enterprise was sustainable where benchmarking was required to be done with reference to actual quantity shipped and the exchange rate prevailing on the shipment date.

Analysis: The adjustment arose from comparison of freight paid under charter arrangements with an arm's length benchmark. The relevant enquiry under Chapter X was whether the international transaction was at arm's length on the date the shipment actually occurred. The agreement quantity and the exchange rate on the date of contract were treated as only contractual promises, while the transaction was considered to fructify upon actual shipment. On that basis, actual shipped quantity and the exchange rate prevailing on the shipment date were held to be the proper parameters for benchmarking.

Conclusion: The transfer pricing adjustment was deleted and the issue was decided in favour of the assessee.

Issue (ii): Whether the assessee was entitled to claim indexation while computing long-term capital gains, though the claim was raised for the first time before the appellate authority.

Analysis: The claim for indexation was a statutory benefit and could be considered at the appellate stage even if not claimed in the original return or computation. The restriction in Goetze (India) Ltd. was treated as confined to the assessing authority, while appellate authorities were competent to entertain a valid claim. The claim was therefore directed to be verified and allowed in computation of capital gains.

Conclusion: The assessee was entitled to seek indexation relief, subject to verification, and the issue was decided in favour of the assessee.

Final Conclusion: The appeals were disposed of by granting substantive relief on the transfer pricing issue and by permitting the indexation claim in the capital gains computation, resulting in partial success for the assessee.

Ratio Decidendi: For transfer pricing under Chapter X, benchmarking must be aligned with the actual international transaction as it is realised, and a valid statutory claim may be entertained at the appellate stage even if not made in the original computation.

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