TaxTMI 
TaxTMI 
2015 (9) TMI 178
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.... grounds are general which do not require any specific adjudication. The ld. AR did not press these grounds as well. These grounds, therefore, stand dismissed. 3. Ground no. 3 has three parts. The first part is against some of the aspects relating to the computation of the Profit Level Indicator (PLI), being, the Operating Profit/Total Cost (OP/TC) of the assessee. 4. Briefly stated, the facts of the case are that the assessee was established as an Indian company in 1990 as a wholly owned subsidiary of a Claas KGaA mbH, Germany. Until 31.8.2002, the assessee was known as Escorts Claas Ltd., with 60:40 joint venture between Escorts India Ltd., and Claas, Germany. Thereafter, the entire shareholding was acquired by Claas, Germany. The a....
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.... the ld. AR that the Advances so written off were given in relation to trading items. Like debts becoming bad from the sale of goods assuming the character of operating cost, the advances given in relation to trading items, becoming non-recoverable, also cannot be considered as anything other than an item of operating cost. In our considered opinion, such amount has rightly been considered as an operating cost. 6. In so far as the Fixed assets written off are concerned, we find that the amount of Rs. 3,84,196/- is distinct from the amount of depreciation claimed by the assessee at Rs. 1.45 crore. This represents a loss on the fixed assets which has been written off. The purchase of fixed assets is capital expenditure. As such, the amount....
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.... sold and subsequently when the amount is realized in that foreign currency and then converted into Indian rupees, the entire amount is relatable to the exports. In fact, it is only the translation of invoice value from the foreign currency to the Indian rupees. The Special bench held that the exchange rate gain or loss cannot have a different character from the transaction to which it pertains. The Bench found fallacy in the submission made on behalf of the Revenue that the exchange rate difference should be detached from the exports and be considered as an independent transaction. Eventually, the Special Bench held that such exchange rate fluctuation gain/loss arising from exports cannot be viewed differently from sale proceeds. 10. In....
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....controverted, as is also apparent from the TPO's order, that the transfer pricing adjustment has been made by considering the total costs incurred by the assessee in respect of transactions with the associated enterprises (AE) and non-AEs. An addition towards transfer pricing adjustment is made by comparing the assessee's profit rate from the international transaction with that of comparable uncontrolled transactions. Under the TNMM, the process is simple in initially finding out the operating profit margin of the assessee and then the average adjusted operating profit margin of comparable cases. Such adjusted profit margin of the comparables constitutes benchmark margin, which is then compared with the operating profit margin from the asse....
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....which is available on page 82 of the paper book, contending that the internal comparables be also taken into consideration. The direction given by the DRP is silent on this issue. 14. Clause (i) of Rule 10B(1)(e) stipulates that the net profit margin from an international transaction with an AE is computed in relation to cost incurred or sales effected or assets employed etc. Clause (ii) is material for the present purpose. It provides that the net profit margin realized by the enterprise or by an unrelated enterprise from a comparable uncontrolled transaction or a number of such transactions is computed having regard to the same base. On splitting clause (ii) into two parts, it divulges that the reference is made to internal and externa....
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....d the computation of the ALP of an international transaction is to find out the profit which such enterprise would have earned if the transaction had been with some third party instead of related party. When the data is available showing profit margin of that enterprise itself realized from a third party, it is advisable to have recourse to an internally comparable uncontrolled transaction. The reason is patent that the various factors having bearing on the quality of output, assets employed, input cost etc. continue to remain, by and large, same in case of an internal comparable. The effect of difference due to such inherent factors on comparison made with the third parties, gets neutralized when comparison is made with internal comparable....