TaxTMI 
TaxTMI 
2023 (4) TMI 1223
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....se on difference of arms length price in relation to international transactions though fully explained. The addition made to be deleted." 3. The sole issue in the present appeal, it was common ground, related to transfer pricing adjustment of Rs.12,39,23,444/- made to the international transaction of import of machine parts in the case of the assessee. The assessee is a company incorporated in India and engaged in manufacturing of filling and packing equipments for beverage, food and non-food industries. Assessee company manufactures complete lines and machines and parts for the beverage industries and provides support from the stage of specific operational requirement of the customer, application engineering, installation and commissioning to after sales service like training, maintenance and parts. The machines manufactured by the assessee are utilized for manufacturing of PET bottles, filling up of the beverage in the bottles, putting labels, packing products, pouching beverages etc. The details of transfer pricing adjustment made to the international transactions of the assessee by the TPO and objection of the assessee to which was dismissed by the DRP are as under: Inter....
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....Arm's Length Mean Profit Margin (B) 9.74% Arrived by AO in order dated 27.02.2015 Arm's Length Price (ALP) Cost (@90.26% of A) (C) 145,03,07,026 Actual Cost (D) 149,27,73,277 Correct Figure as per Assessee and argued by AR TP Adjustment before proportionate adjustment (E= D-C) 4,14,66,191 Proportionate Adjustment Total Cost Side (Debit) AE Transactions (F) 36,62,23,484 Total Cost Side (Debit) AE + Non AE Transactions (same as D) 149,27,73,277 Correct Figure as per Assessee and argued by AR Ratio (G= F/D) 24.533% Proportionate Adjustment (H= ExG) 1,01,72,900 Within +-5% Range? Total Cost Side (Debit) AE Transactions (F) 36,62,23,484 5% of international Transactions 1,83,11,174 Proportionate Adjustment 1,01,72,900 Whether within Range? YES Therefo....
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....perating income; however, Ld.TPO without giving an;1 opportunity trailed the same as non-operating income. The detailed ledger of foreign exchange fluctuation and its summary was submitted before 10 Ld.AO vide assessee's letter dated 03.03.2014. The copy of the same is placed at pages 308 to 316 of the PB." 10. He thereafter contended that in total disregard to these submissions of the assessee as above, the DRP had given no directions on this aspect. He drew our attention to the decision of the DRP at para 4.3 and 4.4 of the DRP pointing out that while at para 4.3 the DRP dealt only with the objection of the assessee to the comparable taken for the purpose of arriving at PLI for determining ALP of the transactions, at para 4.4. the DRP had dealt only with the aspect of certain expenses relating to trading activity not being correct for arriving at the PLI. He pointed out, therefore, that the DRP had totally ignored this contention of the assessee, which he therefore pleaded to be allowed to the assessee. The ld.DR vehemently objected to the same. 11. We have considered contention of the ld.counsel for the assessee before us regarding adjustment to the value of operating ....
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.... This was compared with the actual cost of the assessee and the excess operating cost at the entity level was thus arrived at, and this figure was proposed to be adjusted to the value of the international transaction of the assessee. He pointed out from the table that by applying 9.74% PLI of comparables to the operating revenue of the assessee of Rs.156.07 crores, the ALP of the operating cost of the assessee was arrived at Rs.140.87 crores, while the actual operating cost incurred by the assessee was Rs.153.26 crores. The difference of two of Rs.12.39 crores was adjusted to the international transaction for purchase of spares and parts of Rs.38.26 crores. He stated, therefore, that clearly for arriving at the ALP of the international transaction entity level adjustment had been made. He contended that this adjustment ought to have been made at the transaction level. The case laws in support of its contentions that the adjustment ought to have been made at the transaction level are - i) CIT v. Tara Jewels Exports (P.) Ltd., [2016] 381 ITR 404/[2017] 80 taxmann.com 117 (Bom) ii) CIT v. Firestone International (P.) Ltd., [2015] 60 taxmann.com 235/234 Taxman 1....