TaxTMI 
TaxTMI 
2019 (11) TMI 95
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....e addition of the income of the Appellant by Rs. 16,553,271 by holding that the international transaction of the Appellant pertaining to payment of washout charges does not satisfy the arm's length principle envisaged under the Act. 2.1. In doing so, the Ld. CIT(A) has grossly erred in agreeing with the Ld. AO/Ld. Transfer Pricing Officer's ('Ld. TPO's) action of drawing perverse interference regarding the arm's length behaviour between the parties notwithstanding supporting evidence placed on record; 2.2. The Ld. CIT(A) has erred in law and on facts by holding that there is no valid agreement at the time of washout of the contract for purchase of balance quantity of crude soyabean oil. 2.3. The Ld. CIT(A) has erred in law and on facts doubting the authenticity and genuineness of the evidences placed by the Appellant in support of the contention that the washout transaction was in respect of the valid unexpired contract; 2.4. The Ld. CIT(A) has erred in law and on facts by not giving cognizance to the fact that impugned transaction of payment of washout charges was independently examined and approved by the regulatory body, Reserve Bank of India ('RBI'); 2.5. The Ld. ....
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....Tons (in short "MT") of crude soyabean oil @ USD 546 PMT. The said contract was applicable for shipment during January, 2005. However, the assessee could import 3,064.618 MT of crude soyabean oil and the remaining quantity of 6,922 MT was not purchased due to alleged price fall in India and internationally. The assessee explains that there was a decrease in international price of crude soyabean oil accordingly, the assessee had compensated the AE at USD 55 PMT. In the process, the assessee incurred loss of USD 55 PMT for washout quantity of 6,922 MT. Since the contract rate was applicable for shipment during the month of January, 2005, and the contract to import balance shipment was cancelled on 03.02.2005, on the basis of letter of the assessee dated 02.02.2005; the assessee was asked to justify the claim of loss, by the TPO. The assessee submitted that there was a mutual agreement to cancel the balance unshipped quantity on payment of USD 55 PMT. The plea of the assessee in this regard was that in order to avoid the loss which the company would have suffered because of the fall in price of oil in India, the contract was cancelled. The assessee also explained that infact if it h....
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....essor association of India and also quotation from recognized broker in soyabean oil trading business. He demonstrated the fall in market price between the December, 2004 to February, 2005. The plea of the assessee in this regard was that due to steep fall in the price of oil in the Indian market, the assessee requested its AE to cancel the supply of balance unshipped quantity of crude soyabean oil vide letter dated 02.02.2005. However, LD Asia pointed out that it would suffer bigger loss and compensation @ USD 61 PMT on the balance unshipped crude soyabean oil was asked for. The parties agreed to the compensation @ USD 55 per MT vide letter dated 03.02.2005. Before the CIT(A), the assessee submitted letter dated 10.01.2005 from its AE informing that out of total quantity of 10,000 MT approximately 3,100 MT of crude soyabean oil would be shipped in next few days and the remaining quantity would be shipped by the end of February, 2005. This letter was even filed before the Assessing Officer and the case of the assessee was that based on the mutual agreement between the parties, there was extension of the contract between the parties and the contention of the TPO that contract was v....
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....ere paid. The assessee points out that during the year, the assessee had received and paid washout charges and one transaction was in dispute. After taking us through the sequence of events, the Ld.AR for the assessee submitted that the TPO had benchmarked the Arm's Length Price of transaction at NIL as there was no agreement in February, 2005. The assessee had claimed that it had cancelled the contract in February, 2005. 9. The Ld.AR for the assessee took us through the order of the CIT(A) and pointed out that even if there was nothing in writing, there could be extension of contract. He then, referred to the order of TPO and pointed out that while determining the Arm's Length Price, the TPO held that contract was not in existence. However, by way of conduct of the parties itself, it was proved that there was existence of contract. A contract can be extended between the parties and the TPO cannot challenge the business decision between the two parties. He also pointed that both the CIT(A) & TPO accepted that there was reduction in price of crude soyabean oil, but rejected the claim on the ground that there was no extension of contract between the parties, as in the conseq....
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....t page 88 of the Paper Book. The perusal of the fax dated 10.01.2005 points that LD Asia clarifies that they were planning to ship approximately 3,100 MT of crude soyabean oil, but the remaining quantity of 6,900 MT would be shipped vide the next shipment scheduled for end of February, 2005. The assessee vide written communication dated 10.01.2005 placed at page 370 of the Paper Book acknowledged the aforesaid fact and accepted the shipment of balance quantity of 6,900 MT in February, 2005. However, on 02.02.2005, the assessee communicated to LD Asia that oil market in India had collapsed and as there was possibility of further drop in prices, request was made to cancel the balance quantity of the contract. The said letter is placed at page 93 of the paper Book. In reply LD Asia communicated to the assessee that they had already fixed the vessel to ship the balance quantity of oil to the assessee. It was also communicated that there was drop in the prices of oil in the international market and the current price was USD 420 PMT (FOB). It was communicated that incase the price difference of USD 61 per MT was paid, then the contract could be cancelled. The said letter is placed at pag....