TaxTMI 
TaxTMI 
TaxTMI 
2012 (12) TMI 1113
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....1, of even date in assessee's own case for assessment year 2005-06. Therefore, the submissions made therein and the findings given in the said appeal will apply mutatis mutandis in this year also. 4. Learned Departmental Representative did not object to the submissions of the learned Counsel for the assessee. 5. After carefully considering the rival submissions of the parties and the orders passed by the TPO u/s 92CA(3) of the Act as well as directions given by the DRP, we find that in this year, the TPO has made adjustment on account of sale of polyester film products by its two A.Es i.e., M/s. Global Pet Films, Inc. (GPF) and Garware Polyester International Ltd. (GPIL) for sums aggregating ₹ 2,00,49,316. The assessee has bench marked its ALP in its transfer pricing study report following CUP method in the following manner:- S.no. Nature of Transaction Amount (Rs.) Method 1. Sales of Plain Film to GPF 12,96,15,000 CUP 2. Sale of Sun Control Film to GPIL 9,15,53,000 CUP 3. Sale of Sun Control Film to GPF 38,76,84,000 CUP 4. Payment of commission to GPIL 16,34,327 CUP 6. The assessee has compared the local sales in Indian market with the price charged f....
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.... of market which has been advertum discussed in detail in the foregoing paragraphs. However, after having come to the conclusion that the TPO's approach is not correct and he has not taken into account the vital factor of geographical, economical market differences, held that even the assessee's approach is also not acceptable as the geographical difference does exists between the Indian market on one hand and American & European markets on the other hand. Thus, on the same logic, he rejected the assessee's approach for bench marking the ALP of its transactions with the A.E. This has been discussed in Para-3.32 as reproduced above. 18. After having rejected the approach of the TPO as well as the assessee, he admitted that there are no direct comparable un- control transactions to bench mark the ALP of the A.Es as their market prices prevailing in the concerned geographical countries i.e., U.S.A. and Europe has to be seen subject to certain adjustment of expenses. The sale prices charged to such third party unrelated customers represents comparable un-control prices on aggregate basis in the respective comparable market under comparable circumstances. He even went to analyse the p....
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....ds prescribed therein, being the most appropriate method having regard to the nature of transactions or class of transactions or class of associated persons or functions performed to such persons. For this purpose, six methods have been spelt out. Sub-section (2) of section 92C provides that the most appropriate method referred to in sub-section (1) shall be applied for determination of ALP. Thus, for computation on examining of ALP, one of the most appropriate methods has to be applied. Once the CUP method fails in this case, then it was required by the learned Commissioner (Appeals) to look into for other appropriate methods. Now, the question is what should be the most appropriate method. At the time of hearing, both the parties agreed that in case CUP method is failed, then TNMM can be adopted as most appropriate method, wherein the ALP is determined by comparing the operating profit relative to appropriate base viz. cost as well as asset of the tested party with the operating profit of an uncontrol party engaged in comparable transactions. Accordingly, we set aside the impugned order passed by the learned Commissioner (Appeals) and restore the mater to the file of the TPO and ....
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....esentative heavily relying upon the findings of the TPO submitted that once there is a similar nature of transaction for the same product which are being dealt with by the A.Es and non-A.E. foreign agents, then there cannot be two rates for payment of commission. Payment of commission @ 12.5% is definitely excessive and the TPO has rightly taken @ 5% based on rates of commission paid to non-A.E. foreign agents. On the other hand, the learned Counsel for the assessee had submitted that the agency arrangements with the A.Es were entirely different from that of non A.E. foreign agents and this analysis has been discussed in detail by the learned Commissioner (Appeals). He also pointed out the relevant obligations which were to be carried out by the A.Es which were not there in case of non-A.E. foreign agents. He, thus, strongly relied upon the findings and the conclusion drawn by the learned Commissioner (Appeals). 21. After carefully considering the rival contentions, we find that the TPO has made the adjustment on the ground that commission rate of 12.5% paid to the A.Es are far more than the commission rate paid to the non-A.E. foreign agents which were ranging from 3% to 10% and....
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.... of ₹ 10,92,638, which has been claimed as exempt under section 10(34) of the Act. However, the assessee has not disallowed any expenditure for earning such exempt income. The Assessing Officer invoked the provisions of Rule-8D and calculated the disallowance at ₹ 1,62,56,000, as per the working given at Page-9 of the order. 14. The DRP rejected the assessee's objection even though the assessee relied on the judgment of Hon'ble Jurisdictional High Court in Godrej & Boyce Mfg. Co. Ltd. v/s DCIT, (2010), 328 ITR 081 (Bom.), and directed the Assessing Officer to re-calculate the disallowance in the following manner:- "2. The DRP has considered the latest decision of Hon'ble Jurisdictional High Court in the case of Godrej & Boyce v/s DCIT, wherein even though Rule 8D is not held as applicable retrospectively, yet the Hon'ble Court has decided that disallowance under section 14A has to be made on reasonable basis for earlier years. The assessee has not pointed out any error in application of Rule-8D. The DRP directs the A.O. to recalculate the disallowance by following the procedure given below:- i) Disallow all direct expenses relating to exempt income; ii) D....
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....ature of investment and the expenditure attributable to such an investment and work out some reasonable basis without resorting to Rule-8D in any manner. The assessee will also provide necessary details in this regard to the Assessing Officer. Ground no.3, is thus treated as partly allowed for statistical purposes. 18. Ground no.4, relates to disallowance of ₹ 28,685, as unexplained receipts. 19. The Assessing Officer, from the reconciliation of ITS details, found that a sum of ₹ 28,685, has been received by the assessee from East West Freight Carriers Ltd., but the same has not been credited in the Profit & Loss account. It has been observed by him that the assessee could not give any reason for not including the same in the total income and was unable to explain the transaction and, accordingly, the same has been added. 20. Learned Counsel for the assessee submitted before us that this is factually incorrect and this finding of the Assessing Officer has been challenged specifically in the grounds of appeal. The Assessing Officer has not given proper opportunity after the directions of the DRP which is evident from the fact that the DRP's order was received by the A....