AI Drafter 
TaxTMI 
TaxTMI 
2021 (2) TMI 1318
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....ts are, the assessee is a resident company and is engaged in manufacture and sale of pharmaceutical and chemical products including bulk drugs, pigments and licensed products. The assessee is a part of Merck group headed by Merck KGAA Incorporated under the laws of Germany. During the year under consideration, the assessee had entered into various international transactions with its overseas Associate Enterprises (AEs) including purchase of raw materials known as Active Pharmaceutical Ingredients (API). In the transfer pricing study report, the assessee had benchmarked the international transactions by applying transactional net margin method (TNMM). The Transfer Pricing Officer (TPO), while examining the transfer pricing study report accep....
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....od, however, the Tribunal has observed that while applying CUP, the price at which the product is available in the domestic market should be applied for determining the arm's length price. Though, of course, the Tribunal also observed that only those domestic transactions which are more than 20 kgs should be considered. The learned Counsel submitted, in view of the aforesaid observation of the Tribunal, the export sale price of Unichem Laboratories Ltd cannot be applied as CUP. However, she submitted, one more reason for inapplicability of the export sale price of Unichem Laboratories Ltd is because, out of the four parties to whom exports were made, three are related parties. In this context, she drew our attention to the information recei....
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....ugh, upheld applicability of CUP, however, accepting assessee's plea held that considering strict quality control and stringent regulatory method followed in Germany compared to India, 10% quality adjustment has to be provided while determining ALP under CUP. Further, accepting assessee's plea, the Tribunal in no uncertain terms has held that only the price at which the product is sold in domestic market, that too, sale transaction exceeding quantity of 20 kgs has to be considered for applying CUP. Admittedly, in the facts of the present case the TPO while applying CUP has considered the price charged for export sales made by Unichem Laboratories Ltd. Therefore, in our considered view, such price adopted for applying CUP is invalid. That be....
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....stained. 10. Reiterating the stand taken before the departmental authorities the learned Counsel for the assessee submitted, distribution of free samples being made purely for the purpose of business, has to be allowed as expenditure. She submitted, though, while deciding identical issue in assessee's own case for Assessment Year 2013-14, learned DRP has restricted the disallowance to 20% of the amount claimed, however, in case of another assessee, viz. Johnson & Johnson Ltd Vs. CIT (2014) 150 ITD 377 (Mum), the Tribunal has restricted the disallowance to 2% of the amount claimed. Thus, she submitted, the disallowance may be restricted to 2%. 11. The learned Departmental Representative relied upon the observations of the Assessing Off....
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....ance under rule 8D(2)(iii). We find substantial force in the aforesaid submission of the assessee. Accordingly, we direct the Assessing Officer to verify the claim of the assessee and exclude the investments capable of yielding taxable income from the average value of investment for computing the disallowance under rule 8D(iii). Needless to mention, the Assessing Officer must afford reasonable opportunity of being heard to the assessee before deciding the issue. 14. In ground no. 2.4, the assessee has challenged disallowance of Rs.1,36,67,817 by invoking section 145A of the Act. 15. In course of assessment proceedings, the Assessing Officer, while examining the details of loans and advances furnished by the assessee, noticed that the ....
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....on keeping in view that the adjustment, if any, has to be made to opening stock, purchases, sales and closing stock. We have also noted that while giving effect to the order of the Tribunal, the Assessing Officer has deleted the adjustment made under section 145A of the Act. In view of the above, we restore the issue back to the Assessing Officer for fresh examination keeping in view the directions of the Tribunal in Assessment Year 2003-04 that adjustment, if any, must be made to opening stock, purchases, sales and closing stock. This ground is allowed for statistical purpose. 19. In ground no. 2.5, the assessee has challenged disallowance of club expenditure amounting to R.4,4,383/- by holding it to be of capital nature. 20. We have....