TaxTMI 
TaxTMI 
2014 (11) TMI 1299
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....r the provisions of section 144C(5) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") confirming the proposal of the A.O. in making upward adjustment of Rs. 2,98,38,722/- on the international transaction in the draft Assessment Order dated 28/11/2011. 2. The Learned Dispute Resolution Panel failed to appreciate that the TPO as well as the AO have not made any adjustment required in OP of the comparables on account of the functions, assets employed and risks while reducing the Cost of Material from Value Added cost in adopted PLI of OC/VAC. 3. The Learned Dispute Resolution Panel failed to appreciate that the appellant had rightly adopted Operating Profit/Operating Cost (OP/OC) as PROFIT Level Indicator (PL....
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....the public domain. 6. The Ld DRP failed to appreciate that Functions, Assets employed and Risks (FAR) of large turnover companies differ from the FAR of the small turnover companies thus denying the suitable adjustment to the profits of the assessee. 7. The DRP erred in ignoring the principles upheld by the ITAT in its own case for AY 2005-06, AY 2006-07 that the suitable adjustment to the profits needs to be given for capacity under utilization. The DRP is not correct to say that the assessee has not given any such details to it. 8. The DRP erred in not appreciating the fact that the assessee operate in a specialized field of processing of diamonds and no comparables are available in the public domain similar to ....
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....144C(13)of the Act. During the course of hearing Authorised Representative (AR) of the assessee did not press ground no. 9 and same is dismissed, as not pressed. He further stated that ground no. 3 was effective ground and only that has to be adjudicated, that rest of the grounds were in support of ground no. 3 and they do not need separate adjudication. Considering the same, we are dealing with ground no. 3. 3. The effective ground of appeal deals with the adjustment made by the Transfer pricing officer (TPO)with regard to the international transaction entered in to by the assessee with its Associated Enterprise (AE). It was found that during the year under consideration, the assessee had entered into following transactions: Sr. N....
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.... profit on value added cost (operating cost - cost of material). Finally, he worked out the adjustment as under: Operating Revenue/Processing Charge 8,96,99,291 Cost of material 56,54,858 Value Added Cost 5,32,63,718 Operating Profit at ALP(@113.81% on cost) 6,06,19,437 Operating Profit 3,07,80,715 ALP of Operating Revenue/Processing Charge 11,95,38,013 Adjustment U/s 92CA 2,98,38,722 The arms length price of processing charges was determined at Rs. 11.95 Crores as against 8.96 Crores shown by the assessee. The TPO recommended an upward adjustment of Rs. 2.98 Crores to the total income of the assessee. The matter travelled to DRP-1, Mumbai and after receiving the directions of the DRP the AO, whi....
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....report the assessee had furnished comparables of seven entities, that all other entities were trading in diamond and were also exporting the goods manufactured by them, that assessee was the only entity who had carried out Job work only, that TPO had not brought on record any entity that was doing only job work, that he made some adjustment in the comparables furnished by the assessee. In these circumstances, the basic issue before us is what can be the most appropriate method to determine the ALP for the transactions carried out by the assessee with the AE.It is found that the assessee was getting rough diamonds from the AE and after processing them was sending back to the AE, that it was entitled to recover processing charges only. We fin....