TaxTMI 
TaxTMI 
2019 (4) TMI 1830
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....ubmitted that be shall not be pressing to the ground. Hence this ground raised is dismissed at not pressed. 5. Brief facts in this regard are being dealt with reference to facts of figures for AY 2010-11 as issue is, common. The assessee new UCB India is wholly owned subsidiary of UCB, SA, Belgium. The assessee is engaged in the business of manufacturer and sale of prescription drugs. 6. During the relevant period, the assessee inter-alia entered into the international transaction of export of the FDFs Ucerax and Zyrtec to its AE. The assessee in its transfer pricing study report had benchmarked this international transaction using the TNMM at the segmental level as the most appropriate method using the Profit Level Indicator (PLI) of operating profits on operating cost. 23 comparables had been selected by the assessee and the arithmetic mean of the PLI was computed at 10.59% whereas the assessee's own PLI was 49.60%. Its PLI being higher than those of the comparables, the concerned international transaction of export of FDFs to its AE were claimed to be at arm's length. 7. However, the Transfer Pricing Officer was not satisfied with the above he rejected the bench....
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....d to hold as under: The assessec's submission has been considered. It has already been mentioned above that the Finished Products Exported to AEs are of Superior Quality, they comply US FDA regulations. It is tact that the US PDA regulations are the toughest in the industry. So any drug which qualifies the US PDA has to be of extra ordinary quality. It has been submitted by employee of the assessee that Special Excipients are added to the Drugs which are exported. Thus, though the Quality of the Drugs Exported is very high as compared to drugs sold in India, the Price charged to AE is less than the Price at which it was sold to distributor in India. Therefore, the CUP is applied, taking the price at which the drugs are sold in India as ALP. Therefore, the transaction is not at Arm's Length. The difference in the price is as under: Name Sale price to AE ' ALP Difference/ unit Quantity sold to AE Total difference Ucerax 10 rng Rs.l21/bottle Rs. 327/bott!e 205/bottle 164120 bottles Rs. 3380S720 Ucerax25 mg Rs.l64/bottle Rs. 586bottle 422/bottIe 7670 bottles Rs. 3236740 Zyrtec Rs. 203/bottle Rs. 4....
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....judice basis. The TNMM attempts to benchmark the profits earned by the concerned assessee against suitable comparables whereas the CUP method carries out the benchmarking exercise keeping in view the prices of the specific individual international transactions as against comparable uncontrolled prices of similar products. However, while using the CUP method the AO/TPO are hereby directed to give appropriate discount for the additional marketing expenses incurred by the assessee in its beat sales. The ALP computed by the TPO in his order would be required to be reduced by the per unit salary cost of the employees engaged in the marketing functions. Subject to such modifications of the computation, the CUP method adopted by the assessee is hereby upheld. With these directions the grounds of appeal 1 to 5 with reference to the transfer pricing adjustment on export of FDFs by the assessee to the AE stand disposed. 11. Against the above the assessee is in appeal before us. We have heard both the counsel and perused the records. Learned counsel of the assessee submitted that the transfer pricing officer has erred in rejecting TNMM as the most appropriate method, though it was consiste....
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....it is clear that transfer pricing officer's observation that assessee is trying to camouflage the OP/OC of small export associated enterprises (Rs. 5 cr) with the OP/OC of the total export of Rs. 33 crore is cogent. Further in the annual accounts there are no segmental accounts. The annual audited accounts does contain the breakup of export to associated enterprise and non-associate enterprise. Further more in the audited annual accounts the segmental results for export and local sales is also not available. Further the transfer pricing officer found that assessee has benchmarked the transaction of import of API and export of finished drugs with the same set of comparable. The transfer pricing officer has rightly observed that activity of import of API cannot be compared with that of export of finished products. In these circumstances the transfer pricing officer has rejected the TNMM method of benchmarking adopted by the assessee. 15. In our considered opinion the reasons given by the transfer pricing officer for rejecting the TNMM method adopted by the assessee is quite cogent. The above clearly show that if on the same facts in earlier period TNMM method was adopted it wa....
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.... AEs whereas in the case of sales made to the local third parties, the said sales and marketing functions had to be undertaken by the assessee itself. Here also, the TPO on an analysis of the clauses in the relevant stockist's agreement observed that the stockists had undertaken to promote ethical business practice arid to secure orders from the doctors, hospitals and retailers. Thus substantial marketing functions were undertaken by the stockists appointed and not the assessee. 5.1 In the same context of differences between the export of FDFs to the AE and their sale in the local market, the assessee had contended that when dealing with the AEs, the credit risk borne by the assessee was negligible whereas in the local sales, as there is a possibility of bad debts arising, it is the assessee that bears the credit risk. Here again, the TPO has noted that the delivery to the local stockists is against post dated cheques issued by them to the assessee and to that extent the credit risk of the assessee on local sales is also negligible. In any case, there was a specific clause for payment of interest @18% if the stockists delayed the payments, whereas the invoices of, the AE per....
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....d directed for appropriate discount for the additional marketing expense incurred by the assessee in its local sales. It directed that the ALP computed by T.P.O. would be reduced by per unit salary cost of employees engaged in marketing field. 18. We find that the difference in FAR as submitted assessee has been cogently rebutted by assessee below. Hence we find no infirmity in the direction of the dispute admission panel in this regard. 19. We find that the learned counsel of the assessee has made a proposition before us that assessee has only used its surplus/spare capacity to make exports to the associated enterprise and it has actually made a profit out of the same. We find that this line of argument was never before the authorities below. We do not find any cogency in the same for taking this international transaction out of the ambit of ALP determination. As a matter of fact it is in fact an admission on the part of the assessee that prices charged from the associated enterprise are comparatively lower, which in turn further fortifies the action of the transfer pricing officer. We note that it is the contention of the learned counsel of the assessee that the assessing o....