AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2023 (3) TMI 1090
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....ent of Rs.54,62,391/- in relation to the international transaction of export of finished goods from Thane Plant under Manufacturing segment using Transactional Net Margin Method ('TNMM'). It is prayed that the learned AO/TPO be directed to consider the international transaction of the Assessee as arm's length and accordingly the transfer pricing adjustment of Rs 54.62,391/- should be deleted. 2. On the facts and circumstances of the case and in law, the learned AO/ the TPO erred in making an adjustment of Rs 50,80 855/- in relation to international transaction of export of finished goods from the Nagda Plant by comparing the export prices of the products sold to group companies and the third parties i.e. using the Comparable Uncontrolled Price (CUP) method It is prayed that the learned AO/TPO be directed to consider the international transaction of the Assessee as arm's length and accordingly the transfer pricing adjustment of Rs 50,80,855/- should be deleted. 3. On the facts and in the circumstances of the case and in law, the AO erred in making additions of Rs. 4,86,49,361/- under section 69C of the Act and Rs. 3,85,29,119/- as income from undisclosed ....
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.... order dated 20.01.2014 passed under Section 92CA(3) of the Act, proposed upward transfer pricing adjustment of INR 1,05,43,246/- consisting of transfer pricing adjustment of INR 54,62,391 and INR 50,80,855/- in respect of goods exported from Thane Plant and Nagda Plant, respectively. The Assessing Officer proposed the aforesaid transfer pricing addition in the Draft Assessment Order, dated 24.03.2014. Further, the Assessing Officer also proposed (a) addition of INR 48,69,49,361/- being purchases in excess of the purchases confirmed by the three vendors in response to 133(6) notices sent by the Assessing Officer, and (b) addition of INR 3,85,29,119/- being excess credit balances confirmed by the five Sundry Creditors in excess of the balances recorded by the Appellant in his books of accounts. 5. The Appellant filed objections before the DRP against the Draft Assessment Order, dated 24.03.2014 which were rejected and therefore, Final Assessment Order, dated 10.12.2014 was passed by the Assessing Officer making transfer pricing addition of INR 1,05,43,246, and disallowance of INR 9,77,21,726/- consisting of INR 4,86,49,361/- pertaining to unexplained expenditure and INR 3,85,29,119....
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....o different geographical location to non-AEs could be considered while adopting internal TNMM method since in the present case the transactions undertaken with the AEs vis-a-vis transactions undertaken with Non-AEs were in the same industry, and had high level of similarity with respect to products, cost of goods sold, manufacturing processes, etc. In view of the aforesaid, he submitted that while applying Internal TNMM for benchmarking Thane plant, it would be appropriate to compare the margins earned by the Appellant from exports to AEs with the margins earned by the Appellant from export segment to Non-AEs since the same is available and the margins have not been disputed either by the TPO. 11. We have considered the rival submissions and perused the material on record. The only grievance raised by the Appellant before DRP was that while applying internal TNMM for benchmarking the international transactions of export of goods from Thane Plant, the TPO had compared OP/OC from total sales to non-AEs (i.e. domestic sales as well as export sales) which stood at 11.90% with the OP/OC of export sales from Thane Plant which stood at 3.56%. It was contended on behalf of the Appellant t....
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.... a huge volume difference in exports to AE in USA vis-a-vis other exports to Non-AEs which are far lesser in volumes. Such huge volume differences were bound to impact the sale prices of the products in open market. Thus, it was submitted on behalf of the Appellant that owing to such a huge volume and geographical difference, CUP could not be adopted as most appropriate method for benchmarking export sales of goods from Nagda Plant since it was not possible to eliminate the differences which exist on account of volume and geography for the purpose of benchmarking. He further submitted that it was settled position that under CUP method, price of a transaction is tested which is very sensitive to differences in volume, market, timing, contractual terms, etc. and unless such strict comparability is satisfied, the CUP method cannot be considered as the most appropriate method. In this regard reliance was placed on the decision of the Hon'ble Bombay High Court in case of PCIT vs. Amphenol Interconnect India P. Ltd (ITA No. 1131/2015 & Others) and on the decision of the Tribunal in case of Firmenich Aromatics Production (India) Pvt. Ltd vs. ITO (ITA No. 7145/Mum/2017), and Intervet I....
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....680,563 1,294 56 Damascenone Total 25 19,734 490,873,437 789 45 Great Heart 28,080 303,840 95,340,394 11 55 Aldehyde Supra 245 38,528 96,920,377 157 57 Damascone Alpha 2,175 33,610 84,185,258 15 60 Norlimbanol 250 10,825 73,314,292 43 1,331,314,321 Thus, we find from the facts of the case that the quantities sold to Non-AEs is significantly lower as compared with sales made to AEs. In fact the difference in quantities is to the extent of 1,294 times to 11 times. It is noteworthy that the CUP analysis of common products sold to AE and Non-AE, one of the example taken from the facts of the case is that w.r.t. product 'Damascenone Total', the assessee had sold 25 kg to a Non-AE at the rate of INR 38,000 per kg and sold 1,260 kg and 16,299 kg at the rate of INR 9,800 and INR 9,664 respectively to its AE namely, Firmenich Aromatics (China) Company Limited and Firmenich SA. Similarly, the assesee has sold 50 kg of the same product at the rate of INR 36,408 to other AE. Thus, TPO erred in comparing small; quantities with large quantities, thereby ignoring the volume difference. We also noted that when the qu....
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.... 12. We find that this issue is covered by the decision of the Coordinate Bench of this ITAT in the case of M/s. Amphenol Interconnect India Pvt. Ltd., in ITA No. 477/Pun/2015 [TS-201-ITAT2014(PUN)-TP], wherein it is held as under: xx xx 13. Further, Hon'ble Bombay High Court dismissed the appeal of the Department filed by the Department against the ITAT's order and noted that in this case, since the finished goods are customized goods and the geographical differences, volume differences, timing differences, risk differences and functional differences, the CUP method would not be the most appropriate method to determine the ALP. It upheld the stand of the assessee that TNMM is the most appropriate method to arrive at ALP. This judgement is reported as PCIT Vs. M/s. Amphenol Interconnect India Pvt. Ltd., (supra). 14. In view of the above facts of the case and the issue being covered by the decision of the Co-ordinate Bench of the Tribunal in the case of PCIT Vs. M/s. Amphenol Interconnect India Pvt. Ltd., (supra) and which is affirmed by the Hon'ble Bombay High Court, respectfully following the same we delete the addition and allow this issue of assessee's appeal." (Emphasis S....
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....that similar adjustment made in earlier year has been decided by the Tribunal in favour of assessee. However, since the Department has preferred an appeal to the Hon'ble Bombay High Court for assessment years 2005-06 and 2006-07 to 2008-09, the plea of assessee was not accepted. Further, in respect of imports from associated enterprises, the TPO noted that the said raw materials were used for manufacture and also sold to third party and associated enterprises. On total turnover of about Rs. 42 lakhs, the TPO suggested an upward adjustment of Rs.13,05,812/-. 7. We find that similar issue has arisen in the case of assessee starting from assessment year 2005-06. The Tribunal vide order dated Amphenol Interconnect India (P.) Ltd. v. Dy. CIT [2015] 64 taxmann.com 424 (Pune - Trib), relating to assessment year 2009-10 on similar issue had referred to the order of Tribunal in earlier years relating to assessment years 2006-07 to 2008-09 decided vide consolidated order dated 30.05.2014 and had extensively deliberated upon the issue whether CUP method is to be applied for benchmarking international transactions of assessee and/or whether the assessee was correct in aggregating the tra....
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.... to associated enterprises, the TPO has accepted the TNMM method for arriving at the arm's length price and hence, there was no reason why for balance of export of finished goods, TNMM method should not be applied. Similar direction was also given in respect of imports of finished goods, which were sold to third parties and the associated enterprises and by applying FAR analysis, it was held that where the finished goods were customized goods and the geographical differences, volume differences, timing differences, risk differences and functional differences were there, then CUP method would not be the most appropriate method to determine arm's length price. The TNMM method was held to be most appropriate method. Further, the Hon'ble High Court has applied similar reasoning while deciding appeal of assessee relating to assessment year 2005-06 in ITA No.1388/2015, vide judgment dated 18.04.2018 and the appeal of Revenue has been dismissed. In the totality of the above said facts and circumstances, where the issue stands covered by the order of jurisdictional High Court in the case of assessee itself, there is no merit in the orders of authorities below in making aforesai....
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.... 07.03.2014, (received by the Appellant on 10.03.2014), the Assessing Officer had provided to the Appellant a list of 25 parties which included (a) parties which had not replied to the notices issued by the Assessing Officer seeking balance confirmations and (b) parties which had replied to the notices but there existed differences between the amounts reported by the Appellant and as confirmed by these parties. The Appellant was effectively granted only 4 days time to collate the details and provide reconciliation as the Appellant was directed to file reply by 14.03.2014. The Ld. Authorised Representative for the Appellant submitted that in such short time span, the Appellant was not able to provide necessary documents and reconciliation in respect of 7/8 parties. The Appellant had, vide letter dated 19.03.2014, written to the Assessing Officer sought for a copy of confirmations received from various parties so that the Appellant could provide reconciliation. However, the aforesaid request was rejected by the Assessing Officer. Subsequently, on receipt of the assessment order passed, the Appellant commenced the exercise of reconciliation for the balance 7 parties for whom the disal....