2015 (10) TMI 468

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....has erred in holding that the method adopted by the Assessing Officer to determine arm's length price is not correct and is in violation of the Transfer Pricing Regulation as existing in India despite the fact that the assessee has worldwide monopoly in the manufacturing of oil field equipments and not comparable with other concerns, therefore, the actual profit can be calculated on the basis of comparing the gross profit of subsequent years of the assessee itself." 2. Assessee is engaged manufacturing and servicing of oil field equipment, primarily down hole equipment, tool apparatus, instrument and allied product including drilling equipments, gas well installation tools and specialized equipment used in oil filed industry for drilling a....

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....e it but Assessing Officer did not accept the contention of assessee and made addition of Rs. 85,31,198/- on account of Transfer Pricing Adjustments by observing as under: "I have considered the submission of the assessee. The whole sales have been made to its parent company Weatherford, USA as stated by the assessee. The assessee has monopoly in the whole world in the manufacturing of oil filed equipments and its services. Therefore, there is not comparable case. The assessee on its own decided the bench mark profit. On being further asked, the assessee has submitted the search process. In this search process, it is noted that the assessee has conducted this process through prowess and capitaline plus database. The search for segmental da....

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....herefore, it is obvious that there will be no comparable company manufacturing the same product and its services. Therefore, search process adopted by the assessee on which he has arbitrarily adjusted its profit, which is not a correct comparison. In the case of the assessee, the only one company which can be comparable is the assessee itself. Therefore, the only correct method for arriving at actual profit of the company is comparison of gross profit of the subsequent years of the assessee itself. The assessee has shown gross profit ratio of 28.84% and 30.46% in assessment years 2007-2008 and 2008-2009. The average gross profit comes to 29.65%. This 29.65% is the correct gross profit of the assessee. The assessee has shown gross profit at ....

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....#39;s length margin is it would be inconsistent with the Indian Transfer Pricing Legislation. In determination of arm's length price, the Transfer Pricing Officer is required to act within the framework provided in the Indian Transfer Pricing Regulations. As per provision of Rule 10B(4) of the Income Tax Rules which reads as under: "The data to be used in analyzing the comparability of an uncontrolled transaction with an international transaction shall be the data relating to the financial year in which the international transaction has been entered into: Provided that data relating to a period not being more than two years prior to such financial year may also be considered if such data reveals facts which could have an influence on ....