TaxTMI 
TaxTMI 
2018 (3) TMI 536
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....eals. 2. The Revenue urges only the following common reframed questions of law for our consideration :Uday (i) Whether on the facts and circumstances of the case and in law, the Tribunal was justified in considering TNMM and MAM, without considering the FAR analysis of the transactions to determine the ALP of the export sales to AEs.? (ii) Whether on the facts and circumstances of the case and in law, the Tribunal was justified in differentiating CUP analysis on the basis of geographic difference and volume difference in respect of sale commission, especially when the commission is earned on the basis of percentage of sales? 3. The impugned order of the Tribunal allowed the respondent assessee's appeal from the o....
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....transactions with its AEs. The export of its customized products (finished goods) to its AEs is Rs. 28.68 crores. The respondent applied that TNM method to determine the ALP of its exports to its AEs. The TPO accepted the TNM Method for determining the ALP of exports to the extent of Rs. 27.24 crores. However, only in respect of exports amounting of Rs. 1.40 crores, the TPO was of the view that as there are similar products which have been sold by the assessee to the third parties at higher prices then to the AEs on the aforesaid export of Rs. 1.40 crores. Therefore, the ALP has to be determined on application of CUP method. With the result, the TPO made an addition on the approximately 5% of the total exports i.e. Rs. 1.40 crores by applyi....
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....r has not done necessary Functions, Assets and Risk (FAR) analysis to do the comparison as was done by the TPO. Thus, these appeals require admission. (e) We find the only grievance urged by the Revenue is unjustified. In fact, we find that the TPO has while stating that FAR analysis has to be carried out, does not indicate that it was carried out. On the contrary, we find that the Tribunal in the impugned order has done the necessary FAR analysis. This is so as it has compared the risk and functional differences involved in finished goods being sold to AEs as against those sold to third parties as we have enumerated above to come to the conclusion that the prices at which the finished goods sold to the third parties are not comparables ....
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....n basis of CUP method, the TPO made a transfer pricing adjustment of Rs. 62.89 lakhs for the purposes of arriving at the ALP of commission paid to AEs in Europe. (b) In appeal, the Tribunal in the impugned order found that there are vast differences in the functions which are performed and the rate of commission paid by the respondent to the AEs as well as to the third parties. This was evidenced by the fact that the rate of commission paid varies from 1% to 7% depending upon the services rendered by the AEs in respect of the sales made. The impugned order of the Tribunal finds on facts that the functions performed by the AEs for which they paid sales commission was much wider than that performed by non AE agents. Further, the comparison....