AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2017 (4) TMI 1527
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....the fact that the Department has not accepted the order of ITA T and filed appeal u/s 260A before the Hon'ble High Court of Karnataka. 3. The CIT(A) erred in restricting the disallowance of commission expenditure of Rs. 2,42,33,641/- by the Assessing Officer to 20% thereof without showing any reasonable basis for allowing balance 80% of the amount. The CIT(A) ought to have appreciated that the assessee had not furnished even the basic details of commission paid during the assessment proceedings and therefore failed to prove this expenditure. 4. The CIT(A) erred in concluding that price charged by the assessee in its international transactions (other than royalty paid in the trading segment) entered into with its associated enterprises in the trading segment is at arm's length. 5. The CIT(A) erred in arriving at Gross Profit margin of Advanced Micronic Devices Ltd. at 16.01% on sales for the FY 2004-05 by including service charges and salaries & wages as part of the cost of goods sold, when the same were not included in the case of the assessee. 6. The CIT(A) erred in not reducing the discount allowed by the Advanced Micronic Devices Ltd. ....
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....y we dismiss the grounds." We further note that the CIT (Appeals) has decided this issue by following order of this Tribunal. The case of the revenue is that the department has not accepted the order of the Tribunal for the Assessment Years 2002-03 to 2004-05 and challenge the same before the Hon'ble High Court. Since the order of the Tribunal has not been reversed or set aside by the Hon'ble High Court therefore the same is binding. Accordingly, by following the earlier order of this Tribunal, we do not find any reason to interfere with the impugned order of the CIT (Appeals) qua this issue. 6. Ground No.3 is regarding disallowance of commission expenses. 7. The Assessing Officer noted that the assessee has claimed the commission paid to the sales agents of Rs. 2,85,57,375. The assessee was asked to furnish the details of the commission debited to the profit and loss account and details of the payment made during the F.Y. relevant to the assessment year under consideration. The Assessing Officer found from the details filed by the assessee that the assessee has not furnished the names of the customers amounting to Rs. 2,42,33,641. Accordingly, the Assessing ....
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.... 8 are regarding Transfer Pricing Adjustment. 12. There are various international transactions during the year under consideration as reported in the 3CB Report. The TPO accepted the other transactions at arm's length except the trading segment and distribution segment which was mainly importing medical equipments such as CT Scanner, MRI Scanner, Cath Lab System, etc from its AE being GE Medical Systems Group. The Assessing Officer noted that the assessee imports some equipments from other manufacturers and some items are procured from domestic market. However the assessee has not made any separate analysis for the purpose of determining the ALP for trading segment. The TPO was of the view that the MAM for arriving at ALP could be the Resale Price Method (RPM) for the trading segment. The TPO conducted a search of data base process and capitaline and could find only one company namely M/s. Advanced Micronic Devices Ltd. (AMDL) which is also in the business of trading medical devices equipments like implantable pace makers, operating D-5 etc. The TPO computed the gross profit of M/s. AMDL at 35% in comparison to the gross profit margin of the assessee in trading segment at 18.04%....
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....he same activity. Therefore if the comparable company is having more than one segment as considered by the CIT (Appeals) then only the trading segment of the said company has to be compared with the assessee. Further the CIT (Appeals) has also recomputed the gross margin of the assessee and again held that the adjustment is required to be made only in respect of purchases made from the AE and not on the entire transaction in the trading segment. There is no quarrel on this issue that the adjustment on account of transfer pricing can be made only in respect of the international transactions. In the case on hand, the international transactions in trading segment is confined only to the purchases made from the AE. Since there are other transactions of import and procurement from domestic market therefore the adjustment cannot be made by considering the entire trading segment of the assessee. Thus on principle, we do not find any error on these points however, the CIT (Appeals) has undertaken to recompute the margins of the comparable as well as assessee by considering the fresh material which was not available with the TPO/A.O. which it is not permissible to the CIT (Appeals) to do th....
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.... determined afresh after identifying a comparable and selecting the method. However. if the TPO finds the reasons given for not makinq adjustment in A Y: 2003- 04 and 2004-05 is relevant for this year also. he may choose to do so ALP cannot be determined in isolation of either commercial reality or commercial expediency. Desirable course would be to see in a similarly placed situation what an uncontrolled transaction would reflect. Accordingly it is directed. " 7.4 This direction of the CIT (Appeals) has been confirmed by the Hon'ble ITAT in Page No.43, ITA No.810 to 812/(Bang)/2007 dt.16.05.2008. Since the issue during A.Y. 2005-06 is also the same, the A.O. is directed to follow the same directions of the CIT (Appeals) as held for A.Y. 2002-03 in the appellate order referred to above." The ld. AR has also submitted that in case no comparable is found to determine the ALP of royalty then in view of the decision of this Tribunal in the case of Toyota Kirloskar Motor (P) Ltd. Vs. ACIT 166 TTJ 189 the royalty payment should be clubbed with the other international transactions of the trading segment and the arm's length may be determined on the composite transaction of....