TaxTMI 
TaxTMI 
2024 (12) TMI 803
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.... "1..... 2...... 3...... 4. The jurisdictional Range Head, who is holding regular charge of the JCIT, Range-1, Vijayawada has also been holding Additional charge of the JCIT, Range-2, Vijayawada from 02/11/2020 and also holding the Additional Charges of the JCIT, Range-1, Guntur and the JCIT, Range-2, Guntur from 21/04/2023. 5. As the only issue involved in appeal is relating to Transfer Pricing Adjustment and f iling of appeal on that issue has to be decided by the Authority involved in passing of Transfer Pricing Order and the concerned Higher Authorities of Transfer Pricing. Hence, the comments of the Commissioner of Income Tax (IT & TP), Hyderabad on the order of the Ld. CIT(A)-10, Hyderabad have been requested and the same were received in this office on 9/6/2023 only. 6. That in view of the above reasons, there is a delay of 43 days in filing the appeal. It is respectfully submitted that the delay in filing of appeal is neither willful nor deliberate but for the reasons stated herein above. It is submitted that there are good grounds to succeed in the appeal. It is therefore just and necessary to condone the delay in filin....
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....bal extracts for pharmaceutical, ayurvedic, cosmetic, food & beverage, nutritional and pet care industry. The assessee has carried out economic analysis and has adopted CUP / TNMM ("Comparable Uncontrolled Price / Transactional Net Margin Method") as the Most Appropriate Method. The assessee compared the prices of the product from various quotations received from third parties under CUP Method. The assessee compared the average rate of material sold by its Associated Enterprise ["AE"] to the assessee with quotation for similar products and concluded that the transactions are at Arm's Length. The assessee also carried out the supplementary analysis under the TNMM. Under the TNMM the assessee has taken its AE, M/s. Laila Nutra as the tested party and carried out search process for purchase of raw material in Prowess and Capitoline database and arrived at 15 comparables. The assessee arrived at margin in the range of 8.08 to 10.08% as against the margin of tested party, being the AE (Laila Nutra) of the assessee at 30.09% and accordingly concluded that the transaction is at ALP. The Ld. TPO based on the audited statements of the financials of the assessee had arrived at PBDIT/OR as fo....
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....Natural Extracts Ltd 15.16% 17.86% 11. Ayurvet Ltd 16.01% 19.07% 12. Cian Healthcare Ltd 16.37% 19.58% 13. Emami Ltd 29.36% 41.57% 35 Percentile 5.42% 5.73% Median 8.93% 9.80% 65 Percentile 10.96% 12.31% The Ld. TPO has arrived at the Median of the PBDIT/OR at 8.93% and compared with the assessee's PBDIT/OR which stood at 60.44%. The Ld. TPO also observed that the assessee is availing Tax Holiday benefit under section 10AA of the Act. Thereafter, the Ld. TPO issued a show cause notice dated 09/01/2021 requesting the assessee to show cause with necessary evidences as to why the above mentioned margin of 8.93% (PBDIT/OR) should not be considered for benchmarking the specified domestic transaction and the TP adjustment should not be made accordingly. The assessee furnished its reply on 21/01/2021 by objecting to the proposed adjustment. The Ld. TPO rejected the assessee's contention after examining the same, by observing that the assessee is purchasing almost finished products which are termed as customized products and hence CUP method followed....
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....additional evidences f iled by the assessee during appellate proceedings which were never produced before the TPO or JAO in contravention of Rule 46A of the Income Tax Rules. 3. Whether on the given facts and circumstances of the case and in law, the Ld. CIT(A) is justified in adopting the same set comparables as finalized by the TPO in respect of the assessee, even after shifting the tested party to assessee's AE ie., M/s. Laila Nutraceuticals and directing to delete entire adjustment of Rs. 62,25,78,803/-. 4. Any other ground that may be urged at the time of hearing." 6. The Ld. Departmental Representative ["Ld. DR"] submitted that the assessee has furnished details of segmental revenue of the AE before the Ld. CIT(A) whereas the Ld. CIT(A) has not provided an opportunity to the Ld. AO under Rule 46A of the IT Rules, 1963. The Ld. DR contended that these details are not provided before the Ld.AO / Ld. TPO. The Ld. DR further submitted that the Ld. CIT(A) shifted the Tested Party to AE but has retained the same comparables selected by the Ld. TPO, wherein the assessee was considered as Tested Party. In response, the Ld. Authorized Representative ["Ld. AR"] sub....
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....O in the earlier assessment year has upheld the assessee's stand. The Ld. AR submitted that even though the principle of res judicata does not apply to income tax proceedings, in the instant case, there is no change in the circumstances when compared to previous assessment years, necessitating shifting of Tested Party by the Ld. TPO. The Ld. AR also referred to its written submissions wherein in page 9, Keywords selected by the Ld. TPO in the impugned assessment year as well as in the previous assessment year remained the same, however the Ld. TPO resorted to choose the assessee as the Tested Party. Further, the Ld. AR also objected that the Ld. TPO has taken significant exports as the criteria. He also submitted that during the AYs 2013-14, 2014-15 and 2020-21 the Department has consistently followed selection of AE (M/s. Laila Nutra) as a Tested Party. The Ld AR further submitted that the AE Laila Nutra has four manufacturing units, and the supplies made to the assessee are from Unit-1 only. In his submissions the Ld AR argued that Unit wise assets employed and the segmental unit wise Profits have been submitted before Ld.TPO. Countering the arguments of the Ld. AR, the Ld. DR su....
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....pliant and assumes risks performs more complex functions and dealing with 100% exports. However the AE Laila Nutra performs only the basic operation of extraction. The process flow chart of M/s. Laila Nutra is given below: Detailed supply chain process at Laila and Fysolate from the extraction of Boswellia Serrata Crude oil till the conversion to finished goods. 1. Supply chain process at Laila for extraction of Boswellia Serrata crude oil and extract and conversion to finished goods at Fysolate: From the above process flow it can be observed that the AE performs less complex functions as compared to the assessee which performs the following complex processes in the manufacture of finished product for exports: From the above analysis of the processes carried out by the assessee and its AE it can be seen that the assessee is engaged in specialized process for manufacturing unique and customized products for the purpose of exports. We also find from the order of the Ld. TPO that these customized products are not sold by anybody else in the been able to find a market and therefore the Ld. TPO has not suitable comparable with relation to the manufacture of the p....
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.... Total Sales Quantity (In Kgs) Average Unit Price M/s. Laila Nutraceuticals sales to Fysolate 42,54,15,060 70,500 6,034.30 To direct third party sales 24,95,46,406 60,806 1900.50 Total Sales 67,49,64,466 1,31,306 From the above table, the Assessee's Representative has demonstrated that the AE has charged increased rates to the assessee and also has been consistent in maintenance of profit for the Fysolate segment. Further, the Ld. AR also has submitted the segmental financials wherein the OP/OC of the AE, M/s. Laila Nutra, to the assessee's segment stood at 30%. Further, we also find merit in the argument of the Ld. AR that the Forex Filter has been wrongly applied by the Ld. TPO in the selection of comparables. It is also observed from the table submitted by the assessee which is extracted below for reference wherein the export income of the selected comparables are at an average of less than 10% when compared to the export activities carried out by the assessee which is more than 75% as the assessee is an export oriented unit. S. No Comparable Name Turnover (In INR) Export Income (In INR) Export income (%) Expo....
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....TPO's analysis has not segmental results." The Ld. TPO rejected the assessee's segmental results of the AE since he has chosen to consider the assessee as a Tested Party. Therefore, it can be concluded that no additional evidence has been provided by the assessee before the Ld. CIT(A) in the form of segmental information which was not furnished before the Ld. AO. Therefore, we are unable to accept the contention raised in by the Revenue in its grounds of appeal. We also find that the Ld. CIT(A) has rightly excluded two companies which have exports while arriving at the Arm's Length range. Further, we also concur with the views of the Ld. CIT(A) that the Tested Party M/s. Laila Nutra which is the AE of the assessee can be compared only with the comparables selected by the Ld. TPO as they are functionally broadly similar to that of the AE as a Tested Party. We extract below the findings of the Ld. CIT(A) for reference: "Therefore, the arguments of the appellant, is being the manufacturer and exporter of niche ayurvedic products is factually correct and finding reliable comparables having considerable exports in this category might be a challenge, whereas reliable comparab....