TaxTMI 
TaxTMI 
2016 (1) TMI 1381
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....under consideration along with the ROI. 2.2 The company is a 100% subsidiary company of Honda Motors Co. Ltd., Japan. The assessee has been established as a Central spare -parts management entity/division for all Honda products sold in India. It also exports to Honda subsidiaries/dealers in Indian subcontinent/Europe, Africa and South America. The assessee has entered into the following international transactions during the year under consideration: For A.Y.2009-10: S.No. International Transaction Amount (Rs.) Receipt Amount (Rs.) Payment Method Applied 1. Purchase of Spare parts - 76,70,43,430 TNMM 2. Export Sales 6,819,216 - TNMM 3. Reimbursement paid - 11,56,688 TNMM 4. Reimbursement of technical assistance fee - 14,01,324 TNMM Total 6,819,216 7684,56,32,088 The assessee had used TNM Method as the MAM and had taken 8 external comparables, using the data for financial year ending on 31st March, 2009 in all, except in one case, and had calculated the Profit Level Indicator(PLI) of Operating Profits to sales at 21.97%. For A.Y.2010-11: S. No. Internationa....
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....ed as 'one single business segment' and cannot be fragmented. 3. The Hon'ble DRP/ld. TPO erred in not accepting the economic analysis of the Appellant using external/independent comparable data, and instead undertaking a skewed analysis using internal comparison of gross margins earned by the Appellant on related party purchases vis-à-vis unrelated party purchases, without taking into cognizance that significant volume of transactions were done with domestic group companies only in the non-associated category. Thus, the action of the Hon'ble DRP/ld. TPO defeats the very foundation of a transfer pricing analysis by using "controlled transaction data" for the purpose of determining the arm's length price of the impugned international transaction of the Appellant. 4. The Hon'ble DRP/ld. TPO erred in law in rejecting the transfer pricing documentation maintained by the Appellant and thereby re-determining the arm's length price of the impugned transactions, as the circumstances necessitating the determination of price by the ld. TPO as mentioned in sub-section (3) of section 92C did not exist. 5. Without prejudice, the Hon'ble DRP/ld. TPO erred in law ....
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....es. Thus, a thorough analysis of the Appellant's business operation would clearly reveal that its trading operations can only be viewed as 'one single business segment' and cannot be fragmented. 4. The Hon'ble DRP/ld. TPO erred in not accepting the economic analysis of the Appellant using external/independent comparable data, and instead undertaking a skewed analysis using internal comparison of gross margins earned by the Appellant on related party purchases vis-à-vis unrelated party purchases, without taking into cognizance that significant volume of transactions were done with domestic group companies only in the non-associated category. Thus, the action of the Hon'ble DRP/ld. TPO defeats the very foundation of a transfer pricing analysis by using "controlled transaction data" for the purpose of determining the arm's length price of the impugned international transaction of the Appellant. 5. The Hon'ble DRP/ld. TPO erred in law in rejecting the transfer pricing documentation maintained by the Appellant and thereby re-determining the arm's length price of the impugned transactions, as the circumstances necessitating the determination of price by the ld. T....
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....b) Which is the Most Appropriate Method to be adopted? c) Whether external or internal comparables are to be adopted for determining the ALP d) whether the adjustments to the ALP, claimed by the assessee, are to be granted or not. 4.2 The ld.AR submits that the assessee is the sole distributor of spare parts, components and accessories for Honda products and the responsibility of the assessee is to ensure that such spare parts, components and accessories are available for the end-customer through replacement market. The ld.AR submits that automobile spare parts, components and accessories are purchased from both related and unrelated suppliers. The ld.AR submitted that certain spare parts and components which cannot be procured locally from domestic suppliers on account of various reasons such as, nonavailability of product, available product are of inferior quality, parts/components unique to Honda products are not available etc. are imported from overseas suppliers. The ld.AR submitted that segmental accounting is not possible since the assessee deals with a significant number of spare parts/components and accessories and it is administratively impossible to ....
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....P. report does not claim or indicate that the assessee is carrying out manufacturing activity of any type. In the TP study, the assessee has described itself to be engaged in the business of trading activity. However, the assessee has, as a passing reference, stated before the DRP that it places order for certain spares with the manufacturer in certain circumstances. Placing orders for manufacturing, does not make the assessee a manufacturer. It would be a case of procurement of spares through job work orders on factories. There may be cases of value addition, in case the assessee supplies certain parts to the job work manufacturer for manufacture of a spare part. 6.1 Be it as it may, in our view the assessee is predominantly a distributor. It is involved in some cases in placing orders for certain spares, from factories. This does not in our view, make the assessee a manufacturer. Instead of buying goods off the shelf, it is buying spares by placing job work order from manufacturer. The claim of laying down the design, specification etc. by the assessee, is not acceptable for the reason that, it is the Automobile company which manufactures the car, which does such functions, as....