TaxTMI 
TaxTMI 
2016 (5) TMI 40
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....d protective paints filed its return of income 30. 9. 2009 declaring total income at Rs. Nil. During the assessment proceedings the AO found that the assessee has entered unto international transactions. So he made a reference u/s. 192CA(1) of the Act to the Transfer Pricing Officer(TPO)for determining Arms-Length-Price (ALP). The TPO found that PPG Industries Inc USA had its Head Quarters in Pennsylvania and had more than 110 manufacturing facilities and equity affiliates in more than 20 countries that the assessee was incorporated as a Private Ltd. company that the US company held 100% of the total share capital of the Sigma Marine and Protective Coatings Holdings B. V. Netherlands who in turn held 100% shares of the assessee. The TPO ....
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....se of TP proceedings the assessee was called upon to update the margin of the above four comparable companies using AY 2009-10 data on standalone basis. The assessee vide its letter dt. 7. 11. 2012 submitted the updated margin for the AY 2009-10 was as under : Sr. No. Company Name Updated PLI using data for FY 2008-09 1. Indokem Ltd. 3. 06 2. Jaysynth Dyestuff (India) Ltd. 8. 06 3. Mahalaxmi Dyes & Chemicals Ltd. 1. 76 4. Vipul Dye Chem. Ltd. 7. 46 Average 5. 09 The TPO observed that the assessee had imported protective and marine coatings from its AE and had also sold same material to its AEs that it had aggregated the transaction of purchase and sale of finished goo....
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.... the above referred 4 companies should not be considered as valid comparables. Vide its letter dt. 11. 1. 13 the assessee made elaborate submissions before the TPO. After considering the comparables selected by the assessee the TPO selected final set of comparables. The final comparables were as under :- SN. Company Name Functions Margins as per assessee computed from the annual reports FY 2008-09 1. Hardcastle & Waud Mfg. Co. Ltd. Heat Treatment/metal Work Prod 32. 46 2. Castrol India Ltd. Lubricants-Oils/Greases etc. 40. 47 3. Hindustan Petroleum Corporation Limited Greases 60. 20 4. Indian Oil Corporation Ltd. Lubricants-Greases 48. 46 5. Indokem Ltd. Synthetic Organic ....
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....to its trading activities that same had to be bench marked on an aggregate basis considering the TNMM as the most appropriate method that it had consistently benchmarked its transaction with the AEs on an aggregate basis adopting TNMM that the TPO had accepted the method and benchmarking in the earlier years that the TPO had failed to appreciate that given the limitation of applicability of RPM it was not the most appropriate method for benchmarking that the assessee had conducted a contemporaneous scientific study to arrive at a final set of comparables that the TPO had used current data base and had ignored the contemporaneous data available that he had not used the key words similar to the words used by the assessee that the TPO had sele....
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....rking at the entity level of transactions that there was no value addition at the level of the assessee that the RPM was the most appropriate method to benchmark international transaction relating to purchase and sale of finished goods that the assessee had adopted ex-post approach that it could not constrain the TPO to use the data that was available at the time of TP study. Referring to the provisions of section 92CA r. w. s. 92C(3)of the Act it was held that those sections empowered the TPO to determine the ALP on the basis of such material which was available to him that non availability of data at the time of TP study could be a reason for not considering it for the study that it could not act as a bar on use of the data subsequently b....
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....that in the earlier years the assessee had benchmarked the international transactions on an aggregate basis adopting TNMM for earlier years and the AO had accepted the method for the purpose of benchmarking that the TPO had considered eight comparables as the final set that the assessee had submitted a chart and had claimed that correct gross margin of comparable companies should have been 19. 35% instead of 31. 68% that the gross margin of the assessee was 28. 45% . We find that the assessee had filed an application u/s. 154 of the Act before the TPO to rectify the mistakes in his order that same was never disposed off. It is observed that the TPO had computed GP margin @31. 6% that the assessee group margin was at 28. 45%. We find that th....