TaxTMI 
TaxTMI 
2011 (10) TMI 107
X X X X Extracts X X X X
X X X X Extracts X X X X
....ired to adjudicate in this appeal is whether or not, on the facts and in the circumstances of the case, the learned Commissioner (Appeals) was justified in confirming arm's length price adjustment of Rs 11,51,740, made by the Assessing Officer, under section 92CA(3) with regard to exports sales made to the AEs situated at Panama. 2. The assessee is engaged in the business of, inter alia, manufacturing and trading in fabrics. During the relevant period, the assessee exported fabrics to various independent enterprises to several countries, as also to its associated enterprises in United Arab Emirates and Republic of Panama. In the course of proceedings before the Transfer Pricing Officer, to whom a reference was made by the Assessing Offic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat is sold in the domestic market is the surplus of the export goods, because of the assessee's policy of manufacturing 10% higher quantity than the quantity of the order received - so as to meet any unforeseen contingency, it could not be said that any marketing or sales promotion expenses were incurred for these fabrics. It was also noted that since domestic sales of such fabric is in small quantities, such sales does not really fetch the actual market price. It was also noted that as against the tag price of Rs 99 per meter, the assessee is actually selling the fabric at Rs 72 per meter. The Transfer Pricing Officer, accordingly, adopted the arm's length price at Rs 72 per meter, which, as per his calculations, worked out to US $ 1.5157....
X X X X Extracts X X X X
X X X X Extracts X X X X
....esign # 50001, the Transfer Pricing Officer noted that while the assessee has sold the same to its Panama based AE @ US $ 2.06 per meter, the assessee has also sold the same to unrelated parties @ US $ 2.1902. The assessee's explanation that the same design is sold to a Spain based independent enterprise @ US $ 1.90 per meter and to a Hong Kong based independent enterprise @ US $2.38 per meter, whereas the rate of US $ 2.1902 is picked up on the basis of exports to developed markets only was simply brushed aside. Accordingly, ALP was adopted @ US $ 2.1902 per meter, and the difference was added to assessee's income. Aggrieved, inter alia, by the additions as a result of the above ALP adjustments, assessee carried the matter in appeal before....
X X X X Extracts X X X X
X X X X Extracts X X X X
....AE, in the absence of usual transparency about true ownership, and even such a treatment must have an enabling provision in the transfer pricing legislation. In other words, on a conceptual note, an enterprise being located in a tax heaven can at the most bring such an enterprise within scrutiny of transactions taking place at the arm's length price, and not beyond that. Learned CIT(A)'s approach is devoid of any legal basis and plainly contrary to the scheme of the transfer price provisions. 5. On merits of the ALP adjustments, we find that, so far design # 52030 is concerned, there cannot indeed be any rationale in comparing domestic invoice price of the goods with export invoice price of the goods - without taking into account neither....