TaxTMI 
TaxTMI 
2023 (7) TMI 844
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....able on record. We find that assessee is an Indian Shipping Company plying its own ships and occasionally ships hired from its Associated Enterprises (AEs). The return of income for the assessment year 2009-10 was filed by the assessee company on 30/09/2009 declaring total income of Rs. 13,82,19,884/-. Considering the international transactions carried out by the assessee with its AEs amounting to more than Rs. 15 crores, the Ld. Assessing Officer made a reference under section 92CA(1) of the Act to the Ld.Transfer Pricing Officer after obtaining the prior approval of the Ld.Commissioner of Income-tax-5, Mumbai. 3.1. The international transactions carried out by the assessee are as under:- S. No. Nature of transaction Value in Rs. Most Appropriate Method 1. Receipts for technical management services provided Rs.1,19,68,923/- Cost Plus Method Comparable 2. Payments for in-chartering of vessels Rs.46,32,92,667/- uncontrolled price (CUP) 3.2. The Ld.Transfer Pricing Officer observed that during the year under consideration, the assessee had taken ships on voyage charter from Tolani Shipping (Singapore) Pte Ltd, an Associated Enterprise (AE). T....
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....-56000 MT / 5% PCT coal Load / Discharge Port : Port Lyttleton / East Coast of India Lay Can: 23^rd March, 2008 / 2^nd April, 2008 Freight Rate : USD 64.50 PMT (b)(PG 22(33))M.V. Prabhu Copal (7.10.2008 to 12.10.2008) (Freight paid amounting to Rs. 13,19,81,397/-): The Assessee entered into a Charter Party agreement with Steel Authority of India Ltd., a Government Undertaking, vide Agreement dated 16^th August, 2008 for transporting cargo of 51,000 Metric Tonnes of Coking Coal from Queensland, Australia to Vishakhapatnam and Haldia ports, India at a freight rate of Rs. 1,997.50 (Rupees One Thousand Nine Hundred Ninety Seven and Paise Fifty only) PMT. The Assessee was required to make its ship available in the month of September, 2008 at port of Queensland. However, since Assessee's own Vessels were engaged in carriage of other cargoes, its own Vessels were not available; hence we had to make arrangement to in-charter a vessel of similar capacity. With that in mind the Assessee approached Associate Enterprise. The Assessee was committed to make a ship available for performing the CPA with Steel Authority of India Ltd., as its own V....
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.... on account of non-performance of contract and not to loose out on business opportunities from reputed Government Companies. The Assessee has taken on voyage charter, vessel, M. V. Prabhu Parvati belonging to the Associate Enterprise, Tolani Shipping (Singapore) Pte. Ltd., vide agreement dated 5th August, 2008 at USD 55.00 Per Metric Ton for transport of cargo from port at Queensland, Australia for discharge at Paradip port, India. Copy enclosed at Annexure 14 (Refer Page Nos. 103 to 114). We are reproducing below the relevant market transactions which indicate the freight rates prevailing at the time the Assessee in-chartered the Vessel. The details of the relevant market transactions obtained from broker, M/s. Interocean, Delhi, (Copy enclosed (Refer Page No. 33)) during the relevant period are given below: M.V. NAVIOUS MERIDIAN - 50,000 MT / 5% PCT coal Load / Discharge Port : Port Queensland / East Cost of India Lay Can : 1^st August, 2008 / 15th August, 2008 Freight Rate : USD 57.75 PMT M.V.JIN XIN SHAN - 50,000 MT / 5% PCT coal Load / Discharge Port : Port Queensland / East Cost of India Lay Can : 1^st August, 2008 / 1....
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....ipped (x) USD 60 PMT (x) Exchange Rate prevailing on the date of shipment 3.6. The Ld.Transfer Pricing Officer, however, did not agree with the contentions of the assessee and proceeded to make a transfer pricing adjustment of Rs. 11,77,31,845/- towards ALP adjustment on account of payment for freight without considering demurrage and brokerage charges thereon. Aggrieved by this, the assessee is in appeal before us. 4. The entire essence of the adjustment made by the Ld.TPO can be captured in the table reproduced herein below:- As per Assessee's Books Voyage No. Actual Quantity Shipped Freight rate per MT as per Agreement (USD) Total Freight Amount (USD) Exch. Rate applied (INR) Freight Rate per MT (INR) Freight Amount (INR) Net Amount of Demurage after Despatch & Brokerage (INR) Freight Amount including Demurrage after Despatch & Brokerage (INR) (MT) (1) (2) (3) (4)=(2)+(3) (5) (6)=(3)*5 (7) (8) (9)=(7)+(8) PDY 1(22) 49,896.70 60.00 2,993,802.00 49.6344148 2,978.06 148,595,610 34,579,239 183,174,850 ....
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.... 123,786,327 123,786,327 49,494,224 - 4,590,960 63,646,662 123,786,327 123,786,327 5. We find for the purpose of benchmarking the international transactions, actual quantity i.e. the subject matter of shipment should be considered together with the exchange rate prevailing on the date of shipment. The purpose of transfer pricing regulation in Chapter X of the Act is only to ensure that on the date of relevant international transaction, whether the said transaction had been carried out by the assessee with the AE at arm's length. The quantity to be shipped as mentioned in the agreement and exchange rate prevailing on the date of agreement is only a promise or a contract entered into between assessee and other parties. That promise gets fructified / materialized only when actual shipment is made. Hence, the benchmarking of the said international transaction should be done on the date of actual shipment of the goods by applying the exchange rate of conversion of USD into Indian rupees prevailing on the date of the said transaction and not on the date of agreement. In our considered opinion, the interpretation of provision....