TaxTMI 
TaxTMI 
2014 (12) TMI 175
X X X X Extracts X X X X
X X X X Extracts X X X X
....see declared a loss of Rs. 17,82,913/- by way of filing its return. The said return was picked for scrutiny after issuance of notice u/s 143(2) etc. The record shows that the assessee is a foreign company incorporated in Singapore and has been engaged in the business of selling various types of smart cards for GSM Cellular mobile phones and caters to clients operating in the telecom industry. IM Technologies Limited India Branch Office3r (IM India) is a branch of IM Technologies Ltd. (IM Singapore). IM India is stated to be engaged in the business of trading in Sim Cards for GSM cellular mobile phones. The SIM cards are imported from Head Office and resold to local customers in India like Bharti Cellular, Idea Cellular and BPL Mobile etc. The AO took note of the fact that the assessee had disclosed, purchase of trading goods amounting to Rs. 9,03,30,047/- and had disclosed a corresponding sales of Rs. 9,75,64,994/- from which total income of Rs. 9,75,64,994/- was claimed incurring expenditure of Rs. 9,94,27,215/- which included purchase of trading goods. Perusing the P&L Account for the year ending 31.03.2006, he concluded that the main cause of loss was the increase in import pric....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... following manner:- 4.2. "Therefore, it is held that the arm's length gross margin is 11.42%. Due to this, the arm's length price of the international transaction relating to import of goods is computed as below:- Sale price of the goods Rs. 97,158,994 Less 11.42% Rs. 11.095,557 Therefore the ALP of purchase Rs. 86,063,436 The arm's length price of international transaction of purchase of goods is Rs. 86,063,436/-, as against the purchase price of Rs. 90,330,047/- .This result into adjustment of Rs. 4,266,611/-. As the assessee had not computed the arm's length price of the international transaction as per the provisions of law and this resulted into furnishing of inaccurate particulars of income and penalty proceedings u/s 271(1)(c) of the Act are separately initiated." 4. In appeal before the First Appellate Authority, the assessee is found to have raised various arguments assailing that the conclusion of the AO in holding that the loss was on account of excessive import price is incorrect on facts. It was submitted that rather the loss was a result of fall in total sales and the GP rate infact when compared to the earlier year is on a better side. The loss it was stated i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r provisions of section 92F(iii), PE is an enterprise. P&L a/c shows sale of Rs. 9,71,58,994, other income of Rs. 4,06,000 and expenses to the tune of Rs. 90,73,183 under the head of personnel expenses, operating expenses, depreciation and financial expenses. However, these do not fall under category of international transaction. The appellant had filed TP report before AO in which three set of comparable companies namely Compuage Infocom Ltd., ACI Infocom Ltd. & SES technologies Ltd. were selected. At the time of preparing TP report, current year's date of only Compuage Infocom Ltd. was available. Therefore, the appellant used current year's date and date of preceding two years of Compuage Infocom Ltd. and benchmarked the transaction at average gross profit margin of 8.80% applying RPM as most appropriate method. The RPM method was used because branch office was only acting as distributor without making any value addition to the product. The AO did not allow use of multiple year's data and used only current year's data of Compuage Infocom Ltd. which showed 11.42% as gross profit margin. The AO did not contest the choice of Compuage Infocom Ltd. as comparable or RPM as most appropr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ve discussion, I hold that the transfer price of international transaction as declared by the appellant satisfy arm's length principle test and no upward adjustment is warranted. Therefore, the AO is directed to delete addition of Rs. 42,66,611/ The grounds of appeal are accordingly disposed off." 7.1. Accordingly in the absence of any cogent argument assailing the above and being satisfied by the reasoning and finding the departmental ground is dismissed. 8. In the result the appeal of the Revenue is dismissed. 9. In ITA No.-4656/Del/2012, the sole issue agitated by the Revenue pertains to the deletion of penalty imposed u/s 271(1)(c) by the AO amounting to Rs. 3,12,890/- on account of the following two additions made in the assessment order which were accepted by the assessee. The additions subject matter of the penalty proceedings are found discussed in the penalty order in para 3 (a) & (b) and are reproduced hereunder for ready-reference:- (a) "Assessee had claimed an amount of Rs. 5,44,944/- on account of salestax demand. However, no sales-tax order or the nature of demand was brought on record. As such, the expense claimed was not allowable for want of evidence. SO this a....