TaxTMI 
TaxTMI 
2023 (9) TMI 1337
X X X X Extracts X X X X
X X X X Extracts X X X X
....anies from the list of comparables finalized by the Transfer Pricing Officer (TPO). 5. Briefly stated, the facts of the case are that the assessee filed its return declaring total income at Rs. 1,65,79,300/-. This return was accompanied by the Audit Report in Form No.3CEB containing details of certain Specified Domestic Transactions (SDT). The Assessing Officer (AO) made a reference to the TPO for determining the ALP. The latter recommended transfer pricing adjustment of Rs. 11.68 crore. The draft order was notified accordingly. The ld. CIT(A) allowed part relief, inter alia, by excluding eight companies from the list of comparables, against which the Revenue has come up in appeal. 6. The assessee's functional profile has been recorded by the TPO as, being, a company engaged in the retail trade of frozen fish and other seafood products both in the domestic as well as overseas markets and not carrying out any processing activity. The final product of the assessee is not ready to cook and eat but needs to be processed by its customers till it reaches that stage. The assessee made specified domestic transactions of purchase of frozen fish and seafood from its three Associated En....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eight companies under challenge. (i) Tolar Ocean Products Pvt. Ltd. : 8. This was comparable chosen by the assessee not objected to by the TPO. However, the assessee assailed its suo motu inclusion in the list of comparables before the ld. CIT(A), who concurred with the assessee's submissions and expelled it from the list. 9. This company is engaged in diverse activities and also in processing of marine products. It has outside processing as well. As against that, the assessee is only in retail trade of fish and sea products. Since the assessee is not in processing of any marine products, we hold that the ld. CIT(A) was justified in excluding this company from the list of comparables. (ii) Forstar Frozen Foods Private Limited : 10. This company was chosen by the TPO as a comparable. The assessee's objection that it was engaged in processing and export of ready to eat fish with large shelf life did not weigh with the TPO, who included it in his list. The ld. CIT(A) deleted the same. 11. This company is engaged in the business of manufacturing and export of fish and fish products which has ready to eat different packaged products using individually quick frozen tech....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in the list of comparables which was not accepted by the TPO. The ld. CIT(A) removed it. 19. This company is engaged in not only fish processing but also other business segments like food processing, tobacco products and further no segmental data is available. Such a contention raised before the TPO remained uncontroverted. The ld. CIT(A) further observed that this company is engaged in the business of manufacture, marine farming and sale of marine products. Obviously, the assessee is not into any manufacture or marine farming. In our view, the ld. CIT(A) rightly excluded it from the list of comparables. (vii) Uniroyal Marine Exports Ltd. : 20. The TPO included this company in the list of comparables. The assessee's general objections did not got the concurrence of the TPO. The ld. CIT(A) excluded it from the list. 21. This company is engaged in diverse activities of manufacturing shrimps and squids. As the assessee is not into manufacture of shrimps and only in their marketing, we hold that the ld. CIT(A) was right in excluding it from the list of comparables. (viii) Gadre Marine Exports Pvt. Ltd. : 22. This company was included by the TPO in the list of compara....
X X X X Extracts X X X X
X X X X Extracts X X X X
....price is determined by the most appropriate method, the ALP shall be computed in such manner as may be prescribed and accordingly the first and second proviso shall not apply. The first and the second provisos of section 92C(2) read with rule 10B(4) and (5) dealt with the computation of the ALP with reference to the arithmetical mean of the PLI of the comparables computed by considering, usually, the figures for the current year only. Simultaneous with making the first and second provisos inoperative through the third proviso to section 92C(2), rule 10CA has been inserted by the 16th amendment rules. Sub-rule (1) of rule 10CA provides that the ALP of the international or SDTs `shall be computed in accordance with the provisions of this rule'. This shows that where there are more than one comparable, then the ALP for the relevant years, including the year under consideration 2016-17, should be governed by rule 10CA. 27. Sub-rule (2) of Rule 10CA provides that dataset shall be constructed by placing the values of comparables in ascending order. The first proviso to this sub-rule is relevant for our purpose, which reads as under:- `Provided that in a case referred to in cl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....taset. The manner of determination of the weighted average has been enshrined in rule 10CA(3). To summarize, the crux of rule 10CA(2) is that the PLI of the comparables for the purpose of inclusion in the dataset should be computed by considering the weighted average values for the current year plus two preceding years. However, it is useful to mention that the adoption of values for the current plus preceding two years is only qua the comparables and not qua the computation of the PLI of the assessee, which should be computed only w.r.t. the current year values. This becomes glaring from the use of the bracketed part in the first proviso to rule 10CA(2) excluding `not being the enterprise undertaking the international transaction or the specified domestic transaction referred to in subrule (1)'. 29. Then comes sub-rule (4) of 10CA, which provides that where the most appropriate method is, inter alia, the RPM `and the dataset constructed in accordance with sub-rule (2) consists of six or more entries, then the arm's length range beginning from 35th percentile of the dataset and ending with 65th percentile of the dataset shall be constructed and the arm's length price shall be co....