2013 (5) TMI 938

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....hat the assessee was engaged in the business of importing rough diamonds from outside India and exporting the same after processing and polishing the rough diamonds. The AO during the assessment proceedings noted that the assessee had purchased rough diamonds worth Rs. 15, 33,60,532/- from the AE situated in Belgium. The assessee had also sold polished diamonds worth Rs. 7, 25, 50,026/- to the AE at Belgium. Since the assessee had entered into international transactions with the AE the AO referred the matter to Transfer Pricing Officer (TPO) for determination of arms length price of the transaction with a view to make adjustment to the total income. The TPO did not recommend any adjustment in relation to the purchase of rough diamonds. He h....

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....6.55 549.45 27.1 4.70 4.93 Asian Star Co. Ltd.  1188.5 1113.52 74.98 6.31 6.73 Dimexon Diamonds Ltd   1386.40 1328.73 57.67 4.16 4.34 Rosy Blue INdia    1662.22 1560.14 106.08 6.37 6.80 Arithematic Mean           5.51 5.95   2.1 The TPO calculated the profit margin at the rate of 5.95% to the total operating cost of Rs. 44,98,98,908/- and thus computed the arms length value of sales. From the above sales the TPO deducted the non AE sales of Rs. 39,24,10,997/- to arrive at ALP of AE sales at Rs. 8,42,56,896. Thereafter allowing the benefit of +/- 5% range, the TPO computed the TP adjustment at ....

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....iance on the decision of Mumbai bench of Tribunal in case of Hindustan Uniliver Ltd. Vs. ACIT (22 ITR (Trib.) 737) in which it has been held that arms length price has to be determined only with respect to the international transaction and not in relation to the entire sales or turnover. It was argued that in case adjustment was computed only with respect to operating cost of the AE sales no addition could be made if PLI of 5.95% as taken by the TPO or PLI of 6.28% as taken by CIT(A) was adopted. 4.1 Learned CIT(DR) on the other hand submitted that in view of the decision of special bench of Tribunal in case of M/s IHG IT Services (India) Pvt. Ltd. Vs. ITO in ITA no. 5890/Del/2010 and the retrospective amendment made to the second provis....