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2009 (11) TMI 653
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....rused the relevant material on record. Section 145 A has been inserted by the Finance (No. 2) Act, 1998 with effect from 1-4-1999. As per this section value of purchase and sale of goods and inventory is to be made in accordance with the method of accounting regularly employed by the assessee and further adjusted to include the amount of tax, duty, cess etc. actually paid or incurred by the assessee to bring the goods to the place of its location and condition. The Hon'ble Delhi High Court in CIT v. Mahavir Alluminium Ltd. [2008] 297 ITR 77 has held that the unutilised Modvat credit is to tie included in the value of the closing stock and at the same time for the purposes of giving effect to section 145 A, there must necessarily be made a corresponding adjustment in the value of opening stock of that year. Similar view has been expressed by the Hon'ble jurisdictional High Court in CIT v. Mahalaxmi Glass Works (P.) Ltd. [2009] 318 ITR 116 (Bom.). Respectfully following the binding precedent, we set aside the impugned order on this issue and restore the matter to the file of Assessing Officer for giving effect to the provisions of section 145 A in entirety and not restricting i....
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....s. inclusive of 272100 Kgs. sold to its AE. The TPO determined the average rate of sale to all independent enterprises at 20.67 US$ per Kg., which was found to be substantially higher than 14.66 US$ charged by the assessee from its AE. The TPO also recorded the statement of Shri Divakar K. Shenoy, DGM (Production) of the assessee. In response to question No. 13 he stated that the minimum purity for Dicamba was 97 per cent and there were no separate grades of Dicamba. The TPO observed from the invoices of sales to 'AE' and unrelated parties that the description of the goods was given similar as 'Dicamba technically 97 per cent minimum'. On being show caused as to why the average rate of 20.67 US$ be not applied in respect of sale to AE, the assessee furnished a report of Mr. Buhn, which indicated that the price charged by the assessee from its AE was higher than the price charged by China from similar goods exported to USA to some other party. A chart has been drawn at page 12 of the order of the TPO, from which it can be seen that in respect of some transactions of import by Albaugh Inc. from China the rate quoted is 5.44 US$, being the CIF value per Lb. technical. Against certain ....
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....his case in preference to External CUP method as argued by the assessee. He further came to the conclusion that all the evidences filed by the assessee were new and the same could not be admitted in view of Rule 46 A because sufficient opportunity was given by the TPO at the assessment proceedings. In the ultimate analysis the said addition of Rs. 6.44 crores was upheld. 8. We have heard the rival submissions at length and perused the relevant material on record. The ld. counsel for the assessee contended that the provisions of section 92 CA were not applicable in the present case because there was no reduction in the tax liability of the assessee. He stated that it was not a case in which the assessee had endeavoured to reduce any income or the incidence of tax. It was pointed out that Dicamba was exported by the assessee to USA and other countries. Direct export to USA was not permissible and in order to overcome this difficulty, the ld. AR submitted that it was essential to have enterprise at USA. Keeping into consideration the business interest, it was decided by the assessee to create its AE under the name of Gharda USA Inc. It was put forth that total quantity sold by the ....
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.... 125 to unrelated parties are sold to the AE at Rs. 105, there is reduction of income to the extent of Rs. 20 in the hands of Indian Enterprise. If the Indian Enterprise had charged the same price from its AE as that from the unrelated parties, its profit would have been Rs. 25 instead of Rs. 5 by way of a sale to AE. How much tax is paid by the foreign AE is not relevant in the determination of correct tax liability in the hands of the Indian enterprise. What is material is that the rightful tax payable in India should not suffer due to the adjustment of price for goods or services between the related enterprises. The contention of the ld. AR that the entire exercise of determining ALP of the transactions between the two enterprises is useless as the price charged or paid by one enterprise to another AE is tax-neutral on totality, therefore, is sans merit. The payment of tax by the AE abroad does not contribute anything to the Indian exchequer. Important factor is the payment of tax qua India and not qua the assessee along with its AE on a whole. If we agree with this submission of the ld. A.R that as the ultimate tax liability of the assessee together with its AE does not vary ev....
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....al to indicate as to whether Mr. Bhun, a private individual claimed by the assessee as expert in this field, was even competent to issue such report, which, in turn, was in the nature of a self serving evidence. He then submitted that the price stated in this report was not backed by any data from some Government agency in USA. It was pointed out that Mr. Buhn took into consideration only certain instances of import made by one USA party from China which was inappropriate in as much as it was imperative to consider the import price of Dicamba in relation to all the parties in USA so as to determine the correct and fair ALP of the transaction between assessee and AE. Since the assessee had itself effected exports to other countries, the ld. D.R. stated that the price charged from other unrelated customers threw a proper light on the correct ALP which would have been charged by it from its AE. 12. After considering the rival submissions on this point and perusing the relevant material on record we find that section 92 C(1) lists certain methods from (a) to (f ) as relevant for determining the ALP. It has been mentioned that the most appropriate method should be considered having r....
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....are obtained by the Indian Enterprise. In the instant case we are dealing with a situation in which the property is sold and not purchased by an Indian Enterprise from its AE abroad in an international transaction. Ex consequent the Resale price method cannot be invoked in the hands of the assessee in India for the determination of ALP. If the situation had been otherwise that the assessee had purchased the goods from its AE situated in USA, then this method could have been invoked for determining the ALP. For these reasons we hold that Resale price method is not eve appropriate, what to talk of the "most appropriate method" for determining of ALP in the present international transactions. 15. Now we come to CUP method by which the price charged or paid for property transferred in comparable uncontrolled transaction is identified. Such price is adjusted to account for differences which could materially affect the price in the open market. The adjusted price, so arrived at, is taken as ALP. From the language of Rule 10 B(1)( a) it is palpable that the CUP method is applicable both in the cases where property is purchased or sold. The only requirement is that the price which is ch....
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.... be alike, if not identical. Similarity between the two sets of transactions can be judged by the quality, grade and quantity of the material. In addition, the factors like the location of the parties, availability of raw material; demand and supply equation also play pivotal role in finding out as to whether the two are really comparable or not. Thus in the Internal CUP method the local factors of AE in the other country and all the relevant factors which could have bearing on the price so charged from AE must be taken into consideration. We are dealing with a case in which the assessee has its AE in USA and rate charged is 14.66 US$ per Kg. of Dicamba. There is no other export by the assessee to- USA. The uncontrolled transactions of export made by the assessee are to other countries such as UK, Netherlands, Newzealand. Australia, France etc. in respect of which average rate of 20.67 US$ per Kg. of Dicamba has been determined by the TPO for computing the ALP. All other transactions of export by the assessee are to non-USA countries. The price on which a particular product is available in one country may largely vary from the price prevailing in other countries due to host of fact....