TaxTMI 
TaxTMI 
2012 (12) TMI 22
X X X X Extracts X X X X
X X X X Extracts X X X X
....ions of the Department have been summarized at para 19 of the Order. It is seen that while a detailed submission was made on various facets of the characterization of both the entities to the transaction, the issues raised by the Department have not been factored by the Hon'ble ITAT while deciding the issue. 2. It is seen that the only fact brought on record is the issue of lack of warehousing facility, lack of inventory and credit risk and shipping of the goods directly to the customer. The Department had filed detailed written submissions on the issue. A copy of the same is enclosed along with this Application. The main contention raised was that the Distribution Agreement entered into between the two related parties was liable to ques....
X X X X Extracts X X X X
X X X X Extracts X X X X
....wo related parties requires to be examined in detail based on the conduct of the two parties. The proper characterization of two parties is a sin-qua-non during a Transfer Pricing Study and a study is liable to be rejected if the characterization is wrong. 5. The fact that Vega UAE was not carrying inventory risk and credit risk were only two of the many issues raised by the Revenue which have not been discussed. The main issue was that the agreement itself was a self-serving document which did not have any formula for 'transfer of goods' from AIA to Vega UAE and hence, it could not be relied upon to characterize the Vega's correct character. 6. The fact that AIA was dispatching goods to all its export customers and not some cu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t is an undisputed fact that Vega UAE is not incurring any expenditure on advertising nor has done any substantive marketing. Further, admittedly, the major part of the orders are repeat orders relating to replacements. Hence, it is only appropriate that the entity is reimbursed for its cost appropriately. Without prejudice to the fact that the functions of Vega UAE do not evidence it to be a distributor and that the distributor agreement is a self serving document, the ITAT has wrongly presumed that in all cases of distribution, automatically Profit Level Indicator is to be taken as margin on sales. 10. The ITAT has merely come to a conclusion that the TP adjustments proposed by the AO and confirmed by the DRP on the basis of operating ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....UAE and it has been adhered to also and since the objection of the Revenue is not correct that Vega UAE is not bearing any inventory and credit risk. This finding is given by the Tribunal in this para of the Tribunal's order after examining the facts of the present case. The finding of the Tribunal that Vega UAE is not a marketing service provider but is the distributor of the assessee company, is on this basis that Vega UAE is carrying both the inventory risk as well as credit risk. The objections of Revenue in the M.A. is this that in addition to these two objections that Vega UAE was not carrying inventory risk and credit risk, there were other objections of the Revenue also and the Tribunal has not discussed these objections. Regardi....