AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (1) TMI 728
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....bution of Safilo products (spectacles, sunglasses, etc. ) in India as per the distribution agreement(DA)with Safilo S. p. A. Details of filing of returns of income returned incomes, assessed incomes, etc, can be summmarised as under :- A. Y. ROI filed on Returned Income Asstt. dt. Assessed Income 2010-11 01/10/2010 Rs. 5, 33, 47, 107/- 24/12/2014 Rs. 11, 89, 12, 550/- 2011-12 30/11/2011 Rs. 1, 78, 82, 059/- 09/06/2015 Rs. 1, 99, 02, 330/- ITA/588/Mum/2015, AY. 2010-11: 2. During the assessment proceedings, the AO found that the assessee had entered in to international transactions (IT. s)with its Associate Enterprise(AE). To determine the arm's length(ALP)of the transactions, he made a reference to the Transfer Pricing Officer(TPO). Vide his order, dt. 1/2/122013, the TPO proposed total adjustment of 7. 18 crores. Accordingly, the AO issued a draft assessment order to the assessee who challenged it before the DRP. The DRP issued directions on 30/10/2014, giving part relief to the assessee. The AO passed the final order after receiving the directions of the DRP. 3. First effective ground of appeal is about TP adjustment of Rs. 6. 48 crores. During the Tra....
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....ssessee, that the written down value of carrying cost of goods had to be basis for application of CUP method. Finally, he determined the ALP of the transaction at Rs. 6. 48 crores. 3. 1. Before the DRP, the assessee filed objections and made detailed submissions. After considering available material, it held that the TPO had rightly treated the impugned sum of write off in the carrying cost of the traded goods as an IT, that the value of closing stock was reduced by the assessee on account of certain unsaleable goods, that it had a direct impact on the profit and loss of the assessee as well as the assets of the company, that the DA provided for compensation in respect of same from the AE , that the evidence produced by it in the form of certificates of value and aging schedules of the goods merely indicated that the goods had in fact become unsaleable, that it did not establish the fact that the defect was caused due to default of assessee or that there were no defect at the time of import, that it could not be held that writing-down in respect of traded goods was not recoverable from the AE, that similar writing down had been undertaken in the preceding year, that such writing d....
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....repair the goods, that they failed to appreciate that the event of "write down on carrying value of traded goods" was an extra-ordinary event, that none of the comparables had such an extra ordinary event, that write down of traded goods should not be considered for calculating PLI, that in the case of the assessee the goods were lying in the stock for several years, that same were not in a saleable condition, that gross margin earned by the assessee was at arm's length after allocation of stock write down to respective AY. s. , that the TPO and the assessee had accepted GP/Sales ratio as the PLI for determining ALP in respect of imported goods, that even after considering the revised sales/GP ratio of the petitioner for the year under appeal after allocating stock write down to respective years the margin was as arm's length vis a vis the average gross profit to sales ratio of the comparables, that the TPO had not adopted any of the methods, as envisaged by Rule 10B of the Rules, for making adjustment, that once property was destroyed CUP could not be appelied. (Pg. 27 & 29 paras 64, 67-68 of ITA 7349 of M 2012). He relied upon the cases of M/s. Johnson & Johnson (IT Appeal No. 12....
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.... the goods supplied by them to the agents/wholesalers or semi wholesaler if it is found that same are suffering from manufacturing defects. Besides, some time period is also fixed for returning back the defective products to the supplier. Clause 25 of the agreement, as referred to above, falls in the category of general-replacement-guarantee given by the manufacturers. We are not inclined to confirm the views of the DRP that the agreement was also for replacement of the goods that were not defective i. e. were not salable because of reasons other than manufacturing defect. In other words, it is not an omnibus agreement covering all the eventualities in its broader umbrella. So, we hold that the DRP should not have held that it was an IT. The AE was not involved in any manner in writing off of the obsolete stock. The goods were sold by the AE in the earlier years and in the year under appeal and same were found to be sold at arm's length. For the purchases from the AE no adjustment was made by the TPO in any of the years. So called guarantee period was also over for the goods that were received, by the assessee, before two years. Thus, there was no relation between the writing off o....
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....e on such analysis, the operating margin on operating income of the Assessee (10. 94%) was higher than the arithmetic mean of the weighted average margins earned by the comparables (8. 04%), the Assessee contended that the international transactions between it and its AEs were at arm's length. 3. The Transfer Pricing Officer (TPO) re-computed the net operating margin and included the provision for obsolescence in the sum of Rs. 2, 53, 06, 608 as part of the operating expenditure of the Assessee. As a result, the difference of Rs. 1, 81, 79, 699 in the net operating margin was attributed to the import of raw materials and accordingly, the TPO made a downward adjustment to the value of import of raw materials by the Assessee from its AE. 4. The CIT (A) after analysing the stock obsolescence to sales ratio for the comparables found that none of the comparable companies, except Kirloskar Oil Engines Ltd. (KOEL) had made any provision for stock obsolescence/non-moving inventory. In the case of KOEL, the provision for stock obsolescence was only 1. 03% of its sales whereas it was 8. 98% as far as the Assessee was concerned. The CIT (A) also noted that the mean of the revised ma....
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....But, consistency demands that TPO/AO should record the reasons if they want to make some addition in a particular year-especially if assessee's similar claim is accepted in scrutiny assessment in the earlier years. Basic principles of taxation jurisprudence stipulate that without assigning some plausible reason stand taken in earlier AY. s. should not be disturbed in later years. In the matters of Dalmia Promoters and Developers (P. )Ltd. (281 ITR346) and Excel Industries (358ITR295)have upheld the above principle. In the case of Dalmia Promoters and Developers (P. )Ltd. (supra), the Hon'ble Court has held as follow: "For rejecting the view taken for the earlier assessment years, there must be a material change in the fact situation. There was no gainsaying that the previous view would have no application even in cases where the law itself had undergone a change but before an earlier view could be upset or digressed from, one of two things must be demonstrated, namely, a change in the fact situation or a material change in law whether enacted or declared by the Supreme Court. In the absence of a change in the facts or any additional input there was no compelling reason for taking....
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.... assessee's prerogative to conduct its business in any manner was not acceptable, that the TP provisions were distinct from section 37 which dealt with expenses incurred for business, that under the TP provisions the assessee had to demonstrate that under uncontrolled conditions, that no compensation was to be received from another entity to which market information was provided, that the assesseee failed to do so, that it did not even report the transaction as an IT. Referring to the provisions of Rule 10 B, the DRP held that the assessee could adopt any other method, that in the preceding years, on the same issue, the DRP had accepted 0. 5% of turnover to be reasonable. Finally, it restricted the adjustment to 0. 5% of the turnover of the assessee i. e. to Rs. 17. 05 lakhs. 5. 2. Before us, the AR contented that the assessee did not provide any service to Saffilo Italy, that no market information report or any other material was collated by it for the purpose of providing it to its AE, that the TPO/DRP had determined the ALP on an ad hoc basis i. e. without following one of the prescribed method, that applying rate of half a percent of the turnover of the assessee was not in....
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....M/s. Eastman Kodak Co. USA (EKC). During the previous year relevant to the assessment year the respondent assessee sold its imaging business to one M/s. Carestream Health India Pvt. Ltd, The buyer company i. e. M/s. Carestream Health India Pvt. Ltd. was a Indian subsidiary of M/s. Carestream Inc. an USA company. The case of the respondent assessee was that the transaction of sale of imaging business by the respondent assessee to M/s. Carestream Health India Pvt. Ltd. was a transactions between the two domestic non Associated Enterprises. Hence 'the provision of Chapter X of the Act would have no application. Thus, not even declared this transaction in its 3 CEB report. 4. However the Transfer Pricing Officer (TPO) while examining another Transfer Pricing issue came across the impugned transaction. It held on the basis of Section/92B(2) of the Act that even if the transaction between Kodak\India Pvt. Ltd. ' and M/s. Carestream Health India Pvt. Ltd. was between two domestic non Associated Enterprises, yet it would still be considered to be an International Transaction and Chapter X of', the Act would be applicable. This on the basis that the Holding companies of both ....
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....the ALP for transfer of its imaging business , as determined by the respondent assessee was reasonable is not disputed. The impugned order notes that average gross profit was Rs. 4. 49 crores and respondent assessee had worked out gross profit at Rs, 5. 98 crores to work out the consideration receivable. Thus, quite reasonable. This finding of fact has also not been challenged by the Revenue. 10. We must also record the fact that the ALP was arrived at by the Transfer Pricing Officer (TPO) by not adopting any of the methods prescribed under Section 92C of the Act. The method to determine the ALP adopted was not one of the prescribed methods for computing the ALP. It was not even any method prescribed by the Board. At the relevant time, i. e. for A. Y. 2008-09 Section 92C of the Act did not provide for other method as provided in Section 92C(1)(f) of the Act. The impugned order of the Tribunal holds that the method adopted by the Revenue to determine the ALP was alien to the methods prescribed under Section 92C of the Act. In the above circumstances, the Tribunal declined to restore the, issue to the Assessing Officer for re-determining the ALP by adopting one of the methods as l....