TaxTMI 
TaxTMI 
2020 (2) TMI 878
X X X X Extracts X X X X
X X X X Extracts X X X X
....he ITAT and erroneous reaction of the contentions. The ld. Counsel for the assessee made various submissions in this regard. He submitted that in Para 14 of the order, the Hon'ble ITAT repeated incorrect factual finding that UCB India is trying to camouflage the OP/OC of small exports to AEs with total exports, summarily rejected the segmental accounts prepared by UCB India and the comparable companies considered for the purpose of benchmarking of the impugned transaction. That in Para 15 of the order, the Hon'ble ITAT rejected the contentions raised by UCB India with respect to the principle of consistency. That in Para 16, 17 and 18 of the order, the Hon'ble ITAT has reproduced the findings of the Hon'ble DRP pertaining to the submissions of UCB India for the difference in functions performed, risks assumed and geographical location, without appreciating the additional submission filed before the Hon'ble DRP and the additional supporting evidence filed before the Hon'ble ITAT. That in Para 19 of the order, the Hon'ble ITAT has incorrectly observed that the contention raised by UCB India pertaining to the use of unutilized production capacity for manufa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vities is clearly mentioned in the TPSR. Therefore, assessee's this act of benchmarking the Export of FDF using the same set of comparables is not it acceptable." 14. From the above 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 trans....
X X X X Extracts X X X X
X X X X Extracts X X X X
....placed confirmed orders well in advance. The assessee further contented that while exporting FDFs to the AEs, the functions with respect to sales and marketing were performed by the 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g expenses that are an additional factor of cost in the local sales made by the assessee as compared to the sales made to the AEs. 17. Thereafter the dispute resolution panel had 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....