2012 (12) TMI 1199

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....t year 2002-03 to 2004-05 on the ground that the CIT(A) has erred in deleting the addition made by the TPO under the head export sale of threads. The CIT(A) did not follow Comparable Uncontrolled Price method (hereinafter referred to as "CUP method") with regard to export of thread instead CIT(A) has followed Transactional Net Margin Method (hereinafter referred to as "TNMM") as adopted by the assessee for determining ALP. 3. For the assessment year 2003-04 and 2004-05, the Revenue has taken additional ground that the CIT(A) has erred in holding that assessee company has not transferred any DEPB license, the entire amount represents DEPB accruals and is entitled for deduction under section 80HHC as an export incentive. 4. The brief facts of the case are that the assessee company is one of the largest textile company. It is operating through its three divisions viz: 1. Coats India; 2. Madura Industrial Textiles; & 3. Global Thread Supply, India Coats India division is a marketer of sewing threads throughout the world. Madura Industrial Textiles manufactures wide range of textile products and the Global Thread Supply India division manages the day-to-day operations and....

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....ied with the reasons cited for causing delay in filing of the appeal. In the interest of justice, we condone the delay of 3 days in filing of the appeal and admit the same for disposal on merits along with other connected appeals. 8. Dr. S. Moharana appearing on behalf of the Revenue submitted that the assessee has adopted TNMM with regard to export of thread instead of CUP method. The CUP method is always a preferred method than other methods under Rule 10B(2) of the Income Tax Rules. The TPO rightly discarded the same and held that CUP method should have been adopted. The DR further submitted that the TPO has given cogent reasons for non-applicability of TNMM in the present case. On the contrary, the CIT(A) without giving plausible reasons has reversed the findings of the TPO. The DR further contended that the sale to Associated Enterprises as well as domestic sales has not been considered by the TPO while determining the arms' length price and adopting CUP method. Moreover, 15% bulk discount claimed by the assessee is not justifiable while determining the ALP as no external comparable were made available to the TPO at the time of determination of arms' length price. The DR sub....

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....ed that even if CUP method has to be followed, the difference in volume of products exported to Associated Enterprises and non- Associated Enterprises should be neutralized considering the sales in volumes and thus volume discounts as claimed by the assessee should have been granted to the assessee by the TPO. The counsel for the assessee strongly supported the orders of the CIT(A). 10. For the assessment year 2006-07 and 2007-08, the learned counsel defending appeals of the assessee submitted that the DRP has upheld the findings of the TPO, therefore, his submissions would remain the same what he has stated while defending the order of the CIT(A) relevant to the assessment years 2002-03 to 2004-05. 11. We have heard the submissions made by the respective parties. We have also perused the orders passed by the authorities below and the documents referred to. During the course of submissions, a query was put to the learned counsel for the assessee as to why only internal comparables were given to the TPO for determining cup method. The counsel for the assessee stated that at that time only internal comparables were available. He further submitted, now if required, external compar....

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.... Export of Threads in the present case. the alternative submissions are of academe value Export of Grey Cotton Canvas - ₹ 48,71,239/- 7.3 The appellant applied CUP method for the purpose of determining the ALP in the case of export of grey canvas. However, , the appellant company has applied the CUP method on a representatives sample of 52.68 % of the turnover The A.O/TPO asked the appellant company to apply the CUP method to the entire turnover of Grey Cotton Canvas by taking only those products which has also been sold to AE's and Non-AEs. 7.4 The learned representatives contended that the CUP method could not be applied to all transactions as the appellant company was in the process of closing down its canvas division and hence the assessee was disposing off the stock at a discounted price. The appellant submitted that transactions of distress sales entered into by the appellant could not be regarded under normal circumstances and thus the workings already submitted by the appellant hold good. The A.OI TPO applied the CUP method to the entire turnover and has arrived at a transfer pricing adjustment of ₹ 48,71,239 . 8. I have carefully considered the fac....