TaxTMI 
TaxTMI 
2017 (4) TMI 1535
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....ade by the Learned Transfer Pricing Officer ("TPO"). Addition on Account of Differences in SPCEN and SPCD Manufacturint Grades 2. The Learned CIT(A) and the TPO erred in law and on facts by determining the ALP using Comparable Uncontrolled Price ("CUP") method without applying the principles of application of CUP method as provided in Rule 10B(1)(a) and Rule 10B(2) of the Income Tax Rules, 1962 ('the Rules'). 3. The Learned CIT(A) and the TPO erred in law and on facts in failing to appreciate the material differences between the uncontrolled transactions and the international transactions. Specifically, the CIT(A) and the TPO grossly erred in disregarding the 5%volume discount granted by the Associated Enterprise for sale to a third party, and by/failing to make suitable adjustments to eliminate the material effect of such volume difference thereby disregarding Rule 10B(3) of the Rules. 4. The Learned CIT(A) and the TPO erred in law and on facts in failing to aggregate the same class of international transactions undertaken by the Appellant during the year for the purpose of determination of ALP, thereby disregarding the provisions of Section 92C of the Income Tax Act, 1961....
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....proviso to Section 92C(2) of the Act to the Appellant. The Appellant craves leave to add, alter, amend and/or withdraw any of the above grounds of appeal and to submit such statements, documents and papers as may be considered necessary either at or before the hearing of this appeal as per law. 3.0 Background of the Company Brief facts, International transaction and the method adopted by the assessee are extracted for the sake of convenience from the order of the TPO which reads asunder: M/s. POS-Hyundai is a Joint Venture Company Promoted by three Korean Multi Nationals Hyundai Corporation (HC), Pohang Iron & Steel Company (POSCO) and POSCO Steel Service sand Sales Company (POSTEEL) to manufacture Steel Sheets and components out of cold rolled steel Coils for supply predominantly to Hyundai Motor India Limited (HMIL)and other Automobile & White Goods Industries. POS-Hyundai was incorporated in 1997 with the main objects to carry on business of steel sheet fabrication and manufacture of steel components and parts in primary semi-finished and finished form for automobile, capital goods and other industries. Subsequently, the main object was inserted with the following: "To ca....
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....ided by the total import quantity of particulars pec for the above period. Step-3: On the above price of unrelated importer adjustment is made as appropriate towards volume discount. In the instant case, the import volume of particular grade of unrelated imported is 12 times more than our own imports for the same spec/grade. On are asonable basis, a 5% discount adjustment is considered in their average import price. Step-4: Adjusted import price of unrelated importer is arrived. Step-5: The import price determined above, using the uncontrolled transaction of unrelated importer is more than the actual import price from the same supplier/related Company the actual import price is the Arm's Length Price. The import price determined above, using the uncontrolled transaction of unrelated importer is less than the actual import price from the same supplier/related Company, the unrelated import price is the Arm's Length Price. Step-6: If the Arm's Length Price is less than the actual import price of particular spec/grade, there will be an addition to the total income taken for tax purpose. The addition is determined taking the difference of above two prices multiplied by the tot....
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.... assessee on the reasoning that the prices of the non-AE Company was less even after volume discount and no further adjustment is required to be made. The Ld. CIT(A) has dismissed the assessee's appeal for allowing the volume discount placing reliance on the Assessment Order. Hence the assessee is in appeal before us. 7.0 Appearing for the assessee, the Ld.AR argued that the AE has granted 5% volume discount for sale of third party sales which was not granted to the assessee. Therefore, the Ld.AR requested an adjustment of 5% volume discount on its purchases. The assessee has taken us to Paper Book Page No.241 wherein M/s. Hyundai Corporation has given a letter to the Ld. CIT(A) stating that 5% overseas volume discount is allowed on C&F price who purchases in excess of 10000 MT and accordingly, it was stated that M/s. Mahendra Inter trade Ltd., was allowed trade discount @5% since it has purchased 12889 MT. Hence, the assessee sought for adjustment towards the volume discount of 5%. TheLd.AR of the assessee has not produced any copy of the agreement entered by the non-AE company with M/s. Hyundai Corporation for granting volume discount. On the other hand, the Ld. DR relied on the....
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....AE to plug diversion of profits. Since theassesse failed to prove that the Non AE company was allowed volume discount with relevant bill or account copy, we are unable to accept the adjustments sought by the assessee on account of volume discount andaccordingly dismissed the appeal of the assessee on this issue. 9.0 Ground No.5 is related to the addition on account of difference inSPCEN and SPCD Trading Grades. The assessee argued that both the SPCEN and SPCD Trading Gradesare different degrees in comparability, characteristics for applying the CUP method. However, no evidence is placed before us to establish the argument. The Ld.AR argued that this ground was raised before the CIT(A) but the Ld. CIT(A) has not adjudicated the ground and hence requested to remit the matter back to the file of CIT(A) for adjudication. The Ld. DR did not make any objection for remitting the matter back to the file of the CIT(A). 9.1 We have heard both the parties and observe that the assessee has raised this ground before the Ld. CIT(A) but the Ld. CIT(A) has not adjudicated this ground. Therefore, we remit the matter back to the file of the Ld. CIT(A) to decide this ground on merits. The assessee....
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....gs, resorting to TNMM method by the assesee, is only an af rethought and cannot be accepted. Hence, in the presence of reliable internal comparable data, CUP method was adopted by the TPO and difference in prices calculated. In the TP analysis, only in the absence of internal comparables, the external comparable swill be taken for the comparability purpose using the TNMM method. But in assessees case, the internal comparable are very much available and also the various factors, that would be analysed in the CUP method, ware also satisfied. The items purchased between AE and3d party were also very well comparable in the assessee's case. Hence, CUP is the suitable method. While analysing the assessee's additional comparability analysis submitted during theappellate proceedings as additional grounds of appeal, the majority of the comparables are functionally different and they are into multiple activities. Also assessee has taken weighted average data pertaining to 3 financial years, which is not in accordance with the extant rules. In view of the above discussion, it is requested that assessee's additional grounds of appeal may be rejected and TPO's approach of adopting CUP met....