TaxTMI 
TaxTMI 
2012 (8) TMI 522
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....on for condonation of delay, citing reasons 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 ....
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.... -Packing materials 1884274 Overseas Travel Insurance 6471 Foreign Travel 109061 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.L....
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....d have to be maintained, whereas since purchases were effected from AEs, small quantities could be procured. As per the assessee fashion kept on changing and if more than the required quantities were purchased, the balance would simply become waste. Therefore, even if the prices were higher when these items were purchased from AEs, it had to do so since they 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 resultin....
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....see that fashion kept on changing and raw materials if purchased at higher quantities could result in major loss to it, DRP was of the opinion that such a claim was not backed up by any material. As per the DRP claim of the assessee revolved around its averment that there was minimum order quantity restrictions placed by non-AEs on purchases effected from them. But 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 Ass....
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....d. According to him, the assessee had submitted details of the purchase orders placed with AEs in respect of each of the items mentioned by TPO to show that order quantities were very minimum. However, this aspect also was not considered at all. According to him, assessee, if it wished to indulge in a practice which could result in transfer of profits to its' AEs abroad, 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....
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.... from non-AEs. Assessee has not disputed the data as given by the TPO. Claim of the assessee is that there were minimum order quantity restrictions for purchases from non-AEs which were not there for purchases from AEs. There is a clear finding given by the TPO that if this assertion is accepted it would affect other purchases made from the same AE as well, since assessee purchased 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, un....
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....of the items, when he finds that the on many other items, he is getting a benefit due to lower prices. Here the TPO and Assessing Officer stepped into the shoes of the assessee to decide on which of the items, it should pay more and in which items it had paid more, ignoring those items on which it had paid less. In the circumstances of this case, where out of 35 items only 6 were 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 cas....
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....ansaction of purchase and sale being the nature of transactions, when seen in consolidated from, generates profits which normally would be generated. For this both the purchase and sale transactions would have to be considered. To explain by an example, the assessee purchases a product at Rs. 10 from its AE. The same product is sold by a non-AE at Rs. 12/-. The assessee sells the 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. ....