TaxTMI 
TaxTMI 
2020 (11) TMI 1098
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....f 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 selected by the assessee (engaged in trading of assets) are functionall....
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....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 Rs. Method used for benchmarking 1 Purchase of assets 2,23,88,782 Resale price method 2 Payment of interest 35,093 CUP 3 Purchase of traded goods 2....
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....f 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 transaction having nil value. 6. Assessee approached Dispute Resolution Panel - 2 raising objections against the adjustment to ALP. Assessee objected that the learned transfer pricing officer has grossly erred in rejecting the ....
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....erefore 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 than the actual transaction value but no adjustment can be made for the difference between the declared value and the ALV. He further submitted that assessee has not claimed any depreciation on this machinery. Therefore accordin....
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.... 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 markup by AE to assessee at rate of 8% on certain fixed assets purchased by the assessee. Whether the transaction of purchase of fixed assets is covered as an international transaction or not has been dealt with by the coordinate bench i....