TaxTMI 
TaxTMI 
2020 (11) TMI 1098
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....sessee has raised the following grounds of appeal:- "1. The Ld. DRP/TPO and consequently the Ld. AO have grossly erred in law and on facts and circumstances of the assessee's case in making an adjustment of Rs.15,47,516/- being the mark-up charged by the AEs from assessee in relation to the international transaction of purchase of assets by the assessee from the its associated enterprises (AEs) amounting to Rs. 2,23,88,782/-. 2. The Ld AO has grossly erred in law and on facts in not considering the relief of Rs.65,613/-granted by Id TPO by appeal effect dt.16.11.2016 pursuant to DRP's directions. 3. The Ld. DRP/TPO and consequently the Ld. AO have grossly erred in law and on facts and circumstances of the case by rejecting the benchmarking analysis performed by the assessee using the Resale Price Method (RPM) by: - (a) not appreciating the fact that the assessee has duly carried out the search process applying all the relevant quantitative and qualitative filters and performing the functional analysis of comparables relevant to the international transaction in the nature of purchase of assets. (b) incorrectly holding that comparables....
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....ceedings initiated u/s Sec 271 (1 )(c) are on wholly illegal and untenable grounds since there was no concealment of any income nor submission of inaccurate particulars of income, nor any default according to law by the assessee. 11. That each ground of appeal is independent and without prejudice to other grounds of appeal raised herein. 12. That the order of the Ld. Assessing Officer dated 26th October 2016 is bad in law. 13. The above grounds are without prejudice to each other." 3. Brief facts of the case show that assessee is a company engaged in the business of manufacturing and sale of automobile parts. The operations of the company primarily involve production of auto Mobile parts like a filter, air intake system, air cleaner assembly, gas heat pump filters and other automotive parts of all types of vehicles. 4. Assessee filed its return of income on 29/11/2012 declaring loss of Rs. 7,875,898/-. The case of the assessee was picked up for scrutiny. The assessee has also entered into seven types of international transactions with its associated enterprise which are as Under:- serial number nature of international transactions Amount in....
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....urchased by the associated enterprise. The TPO was also of the view that assessee has not provided any cogent reasons for importing the goods of capital in nature to the assessee from its associated enterprise. In view of this the learned TPO was of the view that ALP of the said transaction should be considered as Nil and adjustment should be made. 5. Assessee submitted its reply stating that the resale price method used by the assessee should be accepted as the most appropriate method. The learned TPO rejected the contentions of the assessee and computed the arm's-length price of the international transaction relating to margin charged by the associated enterprise on the purchase of the asset of Rs. 1,547,516/- as nil and adjustment was proposed. Thus the learned transfer pricing officer was not satisfied with the margin charged by the associated enterprise in supplying moulds/tools, ultrasonic welding machine by Rocki Thailand Co Ltd and moulds supplied by Rocki Japan Co Ltd by charging the margin of 8% over the actual cost of the asset. Therefore the margin charged by the associated enterprise to the assessee for supply of those goods was considered as an international transa....
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....purchased from Japan. Admittedly nobody from AE went to China for testing and Moulds are used for casting. DRP noted that one requires expert for testing moulds and AE had the requisite expertise has not been established. Therefore the DRP upheld finding of the learned TPO that no independent party would have paid 8% to an entity for facilitating sale of machinery. Therefore the objection of assessee were disposed of upholding the action of the TPO with respect to the excess addition made by the learned TPO, the learned DRP directed the TPO to verify the calculation with respect to access adjustment to the extent of Rs. 6 5613/- 7. Based on the above direction the learned AO passed the assessment order wherein the addition on account of international transactions' Alp was made of Rs. 1 547516/- and accordingly the loss was assessed at Rs. 6,328,382. 8. The learned authorised representative adverting to the various grounds of appeal submitted that international transaction of purchase of fixed assets from its associated enterprise is of capital items which does not otherwise gives rise to any income or relevance of any expenses in itself then even though it's ALP is different ....
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....e instances for the same. He further submitted that assessee was charged markup of 8% on actual cost in respect of facilitation of arrangement of fixed assets from outside India. He submitted that in many judicial precedents the markup charged on cost for procurement of services provided by associated enterprise is upheld. He therefore submitted that the addition made by the learned transfer pricing officer and confirmed by the learned dispute resolution panel is devoid of any merit. 9. The learned departmental representative vehemently supported the order of the learned transfer pricing officer and direction of the learned dispute resolution panel. He extensively read the direction of the learned dispute resolution panel. He submitted that when assessee failed to show any services rendered by the associated enterprise, the markup so charged by the associated enterprise to the assessee cannot be held to be at arm'slength and when no services have been rendered the ALP is correctly determined at rupees nil. 10. We have carefully considered the rival contentions and perused the orders of the lower authorities. The only dispute in this case is with respect to the charge of marku....
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.... difference between the assigned value and ALP of such international transaction as per the relevant provisions. But if there is an international transaction in the capital field, which does not otherwise give rise to any income in itself, then even though its ALP may be computed in consonance with the provisions, but no adjustment can be made for the difference between the declared value and the ALP of such international transaction. . In our present context, the international transaction of purchase of fixed assets is required to be benchmarked as per the most appropriate method. The application of the ALP, if required, will give rise to the recomputation of the revised value of the purchase of fixed assets. Such an increase in the value of the fixed assets, being a capital transaction in itself, will not give rise to any addition towards transfer pricing adjustment, but the depreciation on such assets, being a revenue offshoot of the capital transaction, will be required to be recomputed on such revised value. Ergo, we set aside the addition made by the TPO due to the determination of the ALP of the international transaction of purchase of fixed assets and direct that the deprec....