TaxTMI 
TaxTMI 
2012 (8) TMI 522
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.... for the delay has also been filed along with the appeal. Being satisfied about the existence of reasonable cause and in the interest of justice, we condone the delay of 17 days in filing of the appeal and admit the same for disposal. 3. In all the grounds of the assessee, it is alleged that the errors were all committed by Dispute Resolution Panel, since the panel did not consider various submissions made by the assessee on the draft assessment order of the Assessing Officer. 4. Departmental Representative raised a preliminary objection that the grounds required to be modified since it assailed the order of the DRP and not that of Assessing Officer. As per learned D.R., no appeal could be filed against the order of the DRP. On this learned counsel for the assessee submitted that the appeal has been filed against the order of Assessing Officer passed in accordance with the direction of DRP and mere mentioning of DRP in the grounds would not make the appeal itself defective. 5. We have heard the contentions on the preliminary objection raised by Revenue. No doubt, the assessee has mentioned DRP in its grounds of appeal. As per the assessee, DRP had erred in giving directions to t....
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....9061 Body Fashion (M)Sdn.Bhd Purchases-Raw materials 160506 Triumph International (Vietnam) Ltd Purchases-Raw materials 2988 Triumph International (Philippines) Inc. Purchases-Raw materials 17693 Triumph International Spiesshofer & Braun (TI Sub) Purchases-Raw materials 143621762 Triumph International Overseas Ltd. Hong Kong Consumable Materials 36433563 Machinery Attachments 755086 Zig Zag Machines 199427 IT related Communication 113129 Triumph International AG Germany Consumable Materials 570310 Maintenance -Machinery 428699 Prym Intimates Lanka (Pvt) Ltd Purchases-Raw materials 884864 Stretchline Pvt.Ltd. Purchases-Raw materials 31494737 Star Performance Inc Purchases-Raw materials 19772 MAS Capital Private Ltd Books, Journals & Subscription 8806 Staff Training expenses 174791 Head Office & Board Meeting expenses 1415480 Maintenance - Machinery 36333 MAS Holdings Pvt.Ltd IT Related Communication 7253 Unichela (Pvt) Ltd. Staff Training Expenses 22270 Courtaulds Clothing Lanka Pvt. Ltd. Foreign Travel 10014 Staff Training Expenses 3059 MAS Intimates (Pvt) Ltd Fo....
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....alone were willing to supply in small quantities. Assessee also gave a work-out of unwanted stock that would have been there for each of such items if purchases were made from non-AEs at minimum order quantity levels. 9. However, the TPO was not impressed by this explanation. According to him, assessee could not give any convincing reasons why there were no minimum order quantity restrictions for transactions with AEs. As per TPO, assessee could not produce any evidence to show that there were any minimum order quantity restrictions placed by non-AEs for purchases effected from them. TPO noted that assessee had purchased 35 different items from the same AE during the relevant previous year and the difference in prices which gave advantage to the AE were only in six instances. Further, as per the TPO the excess stock resulting due to procurement if effected from non-AEs, could have been sold in the domestic market and there was no chance of a stock pile up. As per the TPO the products manufactured by the assessee were not bio degradable and was not influenced by change in fashions since TIB, the company to whom the assessee was effecting its sales was a leading company in lingerie ....
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.... as per DRP, assessee could not substantiate such claim at all. DRP noted that only in respect of six items considered by the TPO, rate of purchase from AE had crossed tolerance limit and additions sought were also only on such items. 12. With regard to the proposal for recomputing deduction under section 10B of the Act excluding freight, telecommunication expenses and foreign currency expenses, DRP was of the opinion that these were necessary to be excluded since definition of export turnover under section 10B used the words "attributable to". Therefore, as per DRP such expenses though it did not form part of the billing done by the assessee, had to be excluded from export turnover for working out deduction under section 10B of the Act. 13. In other words, DRP approved the draft assessment order proposed by the Assessing Officer on both the counts, for both the years. Accordingly, Assessing Officer completed the assessment making addition for revision in ALP and excluding certain items of expenses from export turnover for the purpose of working out deduction under section 10B of the Act. 14. Now, before us, learned A.R. strongly assailing the order on both the above aspects sub....
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.... it could have been done in other transactions entered with such AEs, since there were substantial sales effected to AEs. For all the other transactions with AEs, TPO did not suggest any revision of ALP and this by itself would show that assessee was very fair in pricing aspects, both with regard to purchase as well as to sales. Therefore, according to him, the revision in ALP was uncalled for. Relying on the supplementary written submissions, learned A.R. submitted that per unit pricing of lingerie with laces and embroidery, if global values were taken came to an average of 3.43 US$ per unit, whereas the average sale price of the assessee to its AEs was 7.84 US$ per unit. This by itself clearly demonstrated that assessee was not indulging in any under-hand dealings for inflating or deflating price for the advantage of AEs. For the proposition that global view has to be taken when there are number of transactions with AEs, A.R. relied on the decision of co-ordinate Bench of this Tribunal in the case of Mainetti India (P.) Ltd. v. Asstt. CIT [2012] 22 taxmann.com 236 (chennai). 15. In so far as exemption under section 10B is concerned, the A.R. submitted that if the items were excl....
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....hased 35 item code of materials of which only 6 were considered by TPO for ALP adjustment. In this regard what we find is that at para no. 8 of their order, DRP has specifically mentioned that rate of purchase from AEs had crossed the tolerance limit only in 6 items of 35 item code material purchased by the assessee from the same AE. Thus, admittedly assessee had effected purchases of materials coming under 35 item code from AE of which materials coming in six item codes alone were considered for analysis by TPO. Other 29 items were found to be appropriately priced, since no ALP revision was recommended in such items. Leaving alone the claim of the assessee that there were minimum order quantity restrictions with non-AEs, which rendered the prices paid by it to AEs, uncomparable with the prices paid to AEs, undisputed fact here is that assessee had substantial volume of international transactions with its AEs. Assessee as per the finding of the TPO herself was a company held by three other companies namely MAS Capital Pvt. Ltd., Triumph International Overseas Ltd. and MAST Industries Inc. USA. TPO has also given a finding that Triumph International was responsible for designs and s....
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....e elected out for reaching an adverse finding, we are of the opinion that the authorities went off tangent in taking a narrow view without considering the total volume of transactions assessee had with its AEs. In taking this view, we are fortified by the decision of co-ordinate Bench of the Tribunal in the case of Mainetti India (P.) Ltd. (supra) where in paragraph 8 it was held as under:- "8. We have considered the rival submissions. Perusal of the provisions of Sec. 92C shows that the words used is "in relation to an international transaction having regard to the nature of transaction or class of transaction or class of associated persons or functions performed by such persons". The term 'class of transaction' and 'nature of transactions' come to the forefront in the present case. In the assessee's case, the transaction with the AE is not one of simple purchase or simple sale. The assessee purchases from one and sells to another. The assessee has purchased from its AE in Hongkong, Srilanka, Malayasia, Pakistan and RANDY Asia and has sold to its AE in Srilanka, Korea, Hongkong, Gulf, Egypt, Bangladesh,Malayasia, Taiwan, UK and Pakistan. In regard to the sales made by the assesse....
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.... finished product to its AE at Rs. 15/-. The same finished product is sold by a non-AE at Rs. 17/-. The profits from both transactions, assessee to AE, as also non-AE to non-AE would give Rs. 5/- But for the purpose of determining the ALP as the assessee purchases from its AE at a price lower than non-AE, the purchase price would be accepted as the deviation is negative i.e. Rs. 10/- is lower than Rs. 12/-, but as the assessee sells to its AE at a price lower than a non-AE, the sale price will be adjusted to the selling price of the non-AE as the deviation is positive i.e. Rs. 15/- is lower than Rs. 17/-. Therefore, Rs. 17/- will be considered as ALP. This would result in (i) The assessee buys from the AE at Rs. 10/- (ii) The assessee's sale price is adjusted to ALP at Rs. 17/-. Thus the profit of the assessee will be determined at Rs 7/-. Now if we compare the profitability, assessee's purchase and sale to AE is Rs. 5/- Percentage of profit 5 x 100 = 33.33% 15 Non-AE purchase & sale is Rs. 5/- Percentage of profit  ....