TaxTMI 
TaxTMI 
2023 (7) TMI 746
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.... for complete scrutiny and notice U/s. 143(2) & 142(1) were issued and served on the assessee. The Ld. AO observed that the assessaee has entered into large international transactions with Associated Enterprises [AEs] and thereafter made a reference to the Ld. Transfer Pricing Officer [TPO] for determining the Arm's Length Price [ALP] U/s. 92CA of the Act. Accordingly, the Additional Director of Income Tax (Transfer Pricing) passed an order vide DIN & Order No. ITBA/TPO/F/92CA3/2020-21/1030178955(1) dated 29/01/2021. While passing the order U/s. 92CA(3) of the Act, the Ld. TPO observed that as per 3CEB report, the following international transactions entered into by the assessee with its AEs: Sl No Associated Enterprises Nature of International Transaction Total amount paid / received or payable / receivable in the transaction Method 1. Alliance One International AG Switzerland tobacco and its byproducts on FOB basis Sale of unmanufactured 174,45,58,168 TNMM 2. Alliance one International AG, Switzerland Sale of unmanufactured tobacco and its byproducts on CIF basis 13,12,79,824 TNMM 3. Alliance one International Inc, USA Sale of....
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..../01/2018. Based on the final set of comparables considered by the Ld. TPO, he computed the Arm's Length Price as follows: Sl No. Name of the company Total OR Total OC Total OP WT OP/OC WT OP/OR 1. Bommidala Ventures Pvt Ltd 80.85 73.57 7.28 9.89 9.00 2. Premier Tobacco Packers Pvt Ltd 177.77 158.01 19.76 12.50 11.11 22.39 20.11 Arithmetic Mean 11.19 10.05 8. The Ld. TPO therefore made an upward adjustment of Rs. 14,41,14,891/- to the returned income of the assessee. Accordingly, the draft assessment order U/s. 144C(1) of the Act was passed on 24/03/2021 by the Ld. AO. Against the draft order, the assessee filed its objections before the Ld. Dispute Resolution Panel [DRP]. The Ld. DRP considering the submissions made by the assessee, gave certain directions to the Ld. TPO on 22/12/2021. Considering the directions given by the Ld. DRP, the Ld. TPO vide its order dated 25/01/2022 revised the TP adjustment to Rs. 13,76,30,449/-. The Ld. AO based on the Ld. TPO's order, passed the final assessment order by adding Rs. 1....
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.... Bommidala Ventures Pvt Limited and exclusion of comparable viz., DTE Exports Pvt Ltd., and (ii) Consideration of export incentives as Non-operating income while computing the ALP. 11. With regard to the comparables, the Ld. AR submitted that Bommidala Ventures Pvt Ltd., [BVPL] is functionally dissimilar with the assessee company as it is engaged in trading / export without any employment of assets. The Ld. AR further submitted that BVPL is not engaged in the manufacturing activity and also in threshing and redrying of the unmanufactured tobacco. The Ld. AR vehemently argued that the assessee is engaged in the export of unmanufactured tobacco by carrying out the activities of threshing and redrying. The Ld. AR also submitted in his written submissions stating that the level of fixed assets (plant & machinery) as a percentage of total sales is 34.39% for the assessee whereas it is 2.31% in the case of BVPL. The Ld. AR therefore argued that the comparable viz., BVPL failed in the Functions, Assets and Risks [FAR] analysis and therefore it should not be included as a comparable for the computation of ALP. The Ld. AR further submitted that the company's FAR analysis has not....
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....e Ld. TPO which was confirmed by the Ld. DRP, from the submissions made by the Ld. AR we find that if any company which should be considered as a good comparable with that of the assessee-company for the purpose of benchmarking its international transactions, it should be based on the FAR analysis ie., Functions performed, Assets employed and Risk undertaken. In the instant case, the Assets employed by the assessee company in the form of Plant & Machinery is Rs. 68,67,22,223/- whereas the comparable viz., BVPL selected the Ld. TPO has employed Assets in the form of Plant & Machinery for Rs. 55,20,109/-. We are therefore of the considered view that based on one of the parameters of FAR analysis ie., Assets employed, we hold that the comparable BVPL could not be a good comparable with that of the assessee company. Hence, the Ld. TPO / Ld. AO is directed to exclude the entity BVPL from the final set of comparables while reworking the international transactions. 13. With respect to DTE Exports Pvt Ltd., we find that the exports constitute only 3.74% of the total turnover and therefore the Ld. TPO / Ld. DRP considered the insignificant exports of DTE Exports Pvt Ltd., and rejected it....