TaxTMI 
TaxTMI 
2014 (7) TMI 866
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.... used on the project (such as BKM 100, Paru, Saskia and Hassan) with the lease rentals paid for Pontoons, to determine the arm's length lease rental for such Pontoons. 2. The learned CIT(A) has erred in disallowing Rs. 90,71,754 by upholding the contention of the AO of adopting a vessel by vessel approach for determining the lease rentals in respect of the vessels BKM 100, Paru, Saskia and Hassan, without appreciating the provisions of section 92C of the Act, read with Rule l0A of the Income-tax Rules, 1962, which provide for adoption of a 'class of transactions' approach for determining the arm's length price in respect of closely linked transactions. 3. The learned CIT(A) has erred in disallowing Rs. 2,36,49,438 by upholding the contention of the AO by not considering the terms and conditions of the Bareboat Charter Agreements and thereby disallowing lease rentals computed in excess of 267 days for the vessels D1 509, D1 508, BKM 100, Paru, Oostende XII and Saskia. The Appellant submits that all the above grounds are independent of and without prejudice to one another." 2. At the time of hearing the ld. AR of the assessee has stated that the assessee does not ....
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....se 25,563,088 Multicat - BKM 100, taken on lease 53,650,809 Pontoon - George Denin, taken on lease 6,645,715 2. BDIPL Tug boat - Hassan, taken on lease 9,666,548 Lease of Survey Equipment 990,388 Purchase of survey equipment 1,495,118 Provision of personnel services 4,121,226 Provision of personnel services 54,637 3. DIPL Provision of personnel services 3,446,968 Provision of personnel services 4,350,690 4. To bench mark the international transaction of leasing of dredger and other equipments the assessee used Comparable Uncontrolled Price (CUP) as most appropriate method whereas for personal service and support services the assessee used Transaction Net Margin Method (TNMM) and for lease of survey equipments Cost Plus method was used as most appropriate method. The assessee computed the ALP of international transaction as the transactional value recorded in the books of account. 5. Before the Transfer Pricing Officer (TPO) the assessee filed a TP study report and computed the ALP study of dredgers and equipments by using the V....
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....e case of Demag Cranes and Components (India) Pvt. Ltd. v. DCIT (56 SOT 187)(Pune) and submitted that it has been held that on combined reading of Rule 10A(d) and Rule 10B of Rules a number of transactions can be aggregated and construed as single transaction for the purpose of determining the ALP if such transactions are closely linked. The ld. AR has also relied upon the following decisions :- 1. Toyota Kirloskar Motors (P.) Ltd. (2012) 28 taxman.com 293(Bang.) 2. Taj Sats Air Catering Ltd. v. DCIT in ITA No.8500/Mum/2010 dated 20/01/2012 3. Henkel Adhesives Technologies India Private Limited v. DCIT in ITA No.1647/PN/2011 dated 18/3/2014. 4. M/s. Intimate Fashion (India) Pvt. Ltd. v. ACIT in ITA No. 2116/Mds/2010 and 2108/Mds/2011 dated 28/06/2012 5. M/s. Mainetti India Pvt. Ltd. v. ACIT in ITA No.1789/Mds/2011 dated 16/3/2012 7. Thus the ld. AR has submitted that if these transactions are aggregated then the aggregated rent paid by the assessee is less than the bench mark accepted by the TPO and no adj....
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....ing and in terms of Rule 10A(d). Aggregation and clubbing of the closely linked transaction are permitted under the Rules and it is also supported by OECD transfer pricing guidelines. In order to examine whether the number of transactions are closely linked or continuous so as to aggregate for the purpose of evaluation it is to be considered that one transaction is follow-on of the earlier transaction and then the subsequent transaction is carried out and dependent wholly or substantially on the earlier transaction. It can be vice-versa when the earlier transaction has been entered into between parties by keeping in mind that a continuous transaction of similar nature will be entered into between the parties thereafter. Therefore, when the transactions are influenced by each other and particularly in determining the price and profit involved in the transactions then those transactions can safely be regarded as closely linked transactions. The OECD guidelines has referred a portfolio approach as business strategy consisting of tax payers bundling certain transaction for the purpose of earning an appropriate return across portfolio rather than single product. For instance some produc....
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....ts and dredgers from more than one associate enterprise, therefore, the aggregation of the transaction is permitted only in respect of those which are between the Assessee and one enterprise separately. Accordingly AO/TPO is directed to determine the ALP by aggregating the various transactions between the Assessee and each associate enterprise separately and not by clubbing the transactions with all associate enterprises. 13. Ground No.3 regarding the adjustment by disallowing the lease rentals paid beyond the period of project. The Assessee has paid lease rentals for the period ranging from 214 days to 306 days. The TPO noted that the lease rentals by the Assessee were paid even after the period for which the vessels/dredger are used in the project. The TPO was of the view that in respect of all vessels the lease rentals allowable will be for 252 days and therefore, the rentals paid by the Assessee for more than 252 days were disallowed by the TPO. The working of disallowance of lease rentals is given at page-9 of the TPO order in para 5.1.4 as under :- Name of Vessel No. of Days for which lease rental paid Total Amount paid in INR Total amount corresponding to 252 days Diff....