AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (1) TMI 1366
X X X X Extracts X X X X
X X X X Extracts X X X X
....se was reopened by issuing notice u/s.148 of the Act dated 31.07.2006 and thereafter the assessment was framed u/s.147 r.w.s. 263 r.w.s. 254 r.w.s. 148(3) of the Act vide order dated 31.12.2007 and the total income was determined at Rs. 5,46,52,300/-. 4. Aggrieved by the order of Assessing Officer, Assessee carried the matter before the ld. CIT(A) who vide order dated 30.12.2009 granted partial relief to the assessee. 5. Aggrieved by the order of ld. CIT(A), Revenue and Assessee both are in appeal before us. The grounds raised by the assessee in its appeal i.e. ITA No.903/Ahd/2010 read as under: "1 The Id. CIT(A) has erred in law and on the facts of the case in going beyond the directions of this Hon'ble ITAT in a set aside proceedings, which is not permissible under the law. 2 The Id. CIT(A) has erred in law and on the facts of the case in confirming the action of Id. AO in making Transfer Pricing Adjustment of Rs. 49,31,625/- in respect of one product of the Appellant by applying the CUP method instead of TNMM applied by the Appellant. 3 The Id. CIT(A) has erred in law and on the facts of the case in taking a contrary view by applying CUP method whereas the Id. CIT(....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent in sale price in respect of 8 products by rejecting the TNM method selected by assessee and adopted CUP as the most appropriate method and the aforesaid adjustment resulted into addition of Rs. 5,00,55,321/-. The adjustment made by the Assessing Officer was upheld by ld. CIT(A) vide order dated 03.08.2005. Against the order of CIT(A), matter was carried by the assessee before hon'ble ITAT. Hon'ble ITAT vide order dated 18.08.2006 (ITA No.2111/Ahd/2005) restored the issue back to Assessing Officer for determination of ALP. Pursuant to the directions of Hon'ble ITAT, before Assessing Officer, assessee furnished details of gross profit markup. The assessee was asked to furnish necessary documents and evidence. Assessing Officer noted that assessee did not furnish the required details and therefore, Assessing Officer completed the assessment on 31.12.2007 and made additions of Rs. 5,00,55,321/-, the same addition as made in the original assessment order that was framed by Assessing Officer. 7.1 Aggrieved by the order of Assessing Officer, assessee carried the matter before the CIT(A) who granted partial relief to the assessee by confirming the addition of only Rs. 49,31,625/- by h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ciated enterprise is compared with net profit margin of the uncontrolled transactions to arrive at the ALP. TNMM requires comparison between net margins derived from the operations of the uncontrolled parties and net margins derived by an associated enterprise from similar operations. Net margin is indicated by the rate of return on sales or cost or operating assets, and this forms the basis for TNMM. A functional analysis of the tested party or" the independent enterprise, as the case may be, is required to determine whether the transactions are comparable and the adjustments that are required to be made to obtain reliable results. The tested party would have to consider other factors, like cost of assets of comparable companies, etc., while applying the return on assets measure. Ordinarily, the tested party, has to be the party provided services because it is on the basis of rate of return on sales or cost or operating assets that transactional margin is computed. These parameters generally available in the case of a party providing services. 5.9 In terms of Rule 10B the CUP method is applied when a price is charged for a product or service. This is essentially comparison o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....irection 92C of the Act are very clear in this regard. The appellant has a right to choose the best applicable method for the purpose of calculation of ALP. The Assessing Officer/TPO can alter that method provided he finds serious defects in the same and he fulfills the three conditions as laid down in sec. 92C(3) of the Act. Hon'ble ITAT Bangalore in the case of Philips software Centre P. ltd. v/s ACIT 119 TTJ 721 has held Transfer pricing - computation of arm's length price- " Selection of appropriate method - While conducting transfer pricing study the appellant, after evaluating the criterion laid down in Rule 10C(2), having selected the CPM as the most appropriate method, TPO. Without sharing with the appellant any analysis, basis or reasons which led him to reject CPM and select TNMM as the most appropriate method, was not justified in doing so -TPO/Assessing Officer can conduct a scrutiny of the most appropriate method employed by appellant only after proving that the documentation maintained by the appellant is deficient or insufficient in any manner - Data used by the appellant being reliable and correct and appellant having discharged the onus by preparing a trans....
X X X X Extracts X X X X
X X X X Extracts X X X X
....9,412,199.19 % 30.98% 14.23% 20.19% 5.12 It may be pointed out that the AO has given one more reason for rejection of appellant's claim stating that necessary details as mentioned fay TPO in his order were not provided during the proceedings under reference. This observation of the AO is without any reasonable base in the sense that the original assessment order was set aside by the Hon'ble ITAT on this ground that the material brought on record was not presented before the AO. Therefore, the Hon'ble Tribunal directed the AO to examine the details filed by the appellant before the CIT(A) after passing of the original assessment order. The AO without examining these details and analyzing the complete facts rejected the method adopted by the appellant completely. 5.13 Now coming to the TPO's order which is the basis for the adjustment in ALP under reference, it is seen that the TPO after rejecting the appellants method for determination of ALP has analysed transactions in respect of 9 items sold by the appellant to its AE and other parties. This analysis can be seen on pages 14 to 16 of the TPOs order dated 28.2.2005. 5.14 The TPO has made adjustme....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o not provide any marketing, technical or after sales services. As against this, the AE provides all these services and therefore the prices are not comparable as provided under Rule 10C. Moreover the quantity sold to DEL was 955 kgs as against 125 kgs sold to different non-AE parties. 5. Tetra Butyl AMM HP Rs.2,69,71.112/- Comparisons have been made With sales made to non-AEs which are not at all comparable inasmuch as these entities do not provide any marketing, technical or after sales services. As against this, the AE provides all these services and therefore the prices are not comparable as provided under Rule 10C. Moreover, the quantity sold to DEL was 92,500 kgs as against 2.350 kgs sold to different non-AE parties. 6. Triethyl Benzyl AM Rs.1,83,600/- Comparisons have been made with sales made to non-AEs which are not at all comparable inasmuch as these entities do not provide any marketing, technical or after sales services. As against this, the AE provides all these services and therefore the prices are not comparable as provided under Rule 10C. 7. Tetra Ethyl AMM BR Rs. 13,79 ,800/- Comparisons have been made with sales made to non-AEs which are not at all com....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... However, the transactions made by the appellant with regard to Tetra Butyl AMM BR as referred to above with its AE and other concerns are not at Arm's Length. This is evident from the discussion made by the TPO in its order. Further, the facts so narrated by the TPO in his order in this regard have not been contradicted by the Ld. A.R during the appellate proceedings. 5.18 Therefore, keeping in view the surrounding circumstances the ALP for the transactions made by the appellant in respect of Tetra Butyl AMM BR is required to be determined on the basis of CUP method. However, while arriving at the appropriate ALP a reasonable allowance is to be allowed to the appellant with regard to the services available to it from its AE vis-a-vis other parties, In the given circumstances it would be appropriate if 10% discount is allowed on the prices of Tetra Butyl AMM BR charged by the appellant from the party equally placed to its AE namely La Porte Performance, Netherland, The appellant has charged Rs. 282 per Kg from such parties, therefore after allowing 10% discount on such price for miscellaneous services available to the appellant from its AE, it should have charged Rs. 253.80....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Biotech in ITA No.554/Ahd/2006 and this issue was answered against the Revenue by this Tribunal. In any case, even in the case of associate concern viz. Schutz Dishman (supra) this Tribunal has upheld the very same reasons given by the assessee for non-application of CUP method of AMP and accordingly, following the Tribunal's decision, we allow the claim of the assessee, upholding the order of CIT(A) on this common issue of the Revenue's appeals. This common issue of Revenue's appeals is dismissed. In view of the submission of both the parties that the facts of the case in the year under appeal are identical to that of earlier years, we respectfully following the decision of Co-ordinate Bench of Tribunal in assessee's own case in earlier years, delete the entire additions made by the Assessing Officer. In the result, these grounds of assessee's appeal are allowed and that of Revenue are dismissed. 8. The fifth ground is with respect to claim of bad debts. 8.1 The Assessing Officer noticed that assessee had claimed Rs. 13,16,191/- on account of sundry balances written off. During course of assessment proceedings, Assessing Officer asked the assessee to justify its claim to which....