TaxTMI 
TaxTMI 
2026 (8) TMI 1546
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....d since there was bonafide reasons thus, the delay be condoned. 3. On the other hand, Ld. AR of the assessee has not objected to the condonation of delay. 4. After considering the request of the Revenue and the facts stated in the condonation application, we find that the AO has reasonable and sufficient cause for delay, accordingly, delay in filing the appeal is hereby condoned and appeal is admitted for hearing on merits. 5. Briefly stated the facts are that the company was incorporated in Financial Year 2010-11, and is a wholly owned subsidiary of Posco Daewoo Corporation (PDC), Seoul, Korea. The assessee engaged in the business of export of Business Support services to the PDC, Trading of Industrial materials on commission basis for overseas companies and also undertakes trading of industrial material on principal-to-principal basis by procuring from PDC for resale on merchant trading basis and exploring opportunity for trading by procuring the various products from domestic market. The return of income was filed on 23.11.2016 declaring total income of Rs. 4,23,94,360/- which was revised on 29.11.2016 at same income. The case was taken up for scrutiny and since the ass....
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....ore not being the correct application of the Resale Price Method as prescribed in the LT. Rules 1961, (Rule 10B). 2. Whether on the facts and circumstances of the case the CIT (A) was right in law in disregarding the comparables chosen by the TPO without considering the detailed functional analysis as done by the TPO wherein the assessee has itself characterised itself as a trader and bears substantial risks as stated in the TP report. 3. Whether on the facts and circumstances of the case the CIT (A) was right in law in not taking into account the time gap in calculation of margins of HRCF coils wherein it is a well-known fact that the more time that elapses between the original purchase and resale the more likely it is that other factors v.i.z changes in the market, rates of exchange, in costs, technological obsolescence etc will have to be taken into account for correct applicability of the Resale Price Method. 4. Whether on the facts and circumstances of the case the CIT (A) was right in law in accepting the assessee's working of the Resale Price method which was based on only one invoice with foreign AE as tested party and not substantiated by app....
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.... deserves to be accepted and the adjustment made by the TPO/AO be restored. 11. On the other hand, the Ld. AR for the assessee vehemently supported the order of the Ld. CIT(A) and submits that the assessee has rightly taken the AE as the tested party as assessee is working under least complex environment where the assessee does assume risk such as market risk, inventory risk, correction risk, quality risk etc. and since goods have been sold on High sea basis, it does not required to maintained any inventory or place for storage of goods. The Ld. AR further submits that the sales has been booked under letter of credits (LC) and all the purchase and sales were made US$, therefore, there is no credit risk involved in the transactions and neither any working capital was required for making such transaction. Accordingly, taking the AE as the tested party is correct. He, therefore, submits that the Ld. CIT(A) after considering these facts has deleted the addition which deserves to be accepted. 12. Heard both the parties and perused the materials available on record. In the instant case, out of the various international transactions carried out by the assessee with its AEs, only tra....
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.... finished goods (steel slabs & HRCF coils) from POSCO Korea (AE) by selecting resale Price Method ('RPM')as the most appropriate method with AE as the tested party. The comparable margin earned by AE from sale of similar goods to third parties was identified. The margin earned by AE from third party sale was 0.30% for sale of steel slabs and 0.34% for sale of HRCF coils. Basis this margin, the appellant made suo moto adjustment to the transfer prices of Rs. 10,54,076/- in respect of steel slabs and Rs. 13,529- on account of HRCF coils. 7.7 The TPO accepted RPM to be the most appropriate method but rejected the use of AE as the tested party by stating that no comparables were used by appellant and comparison has been made with own margins. The TPO rejected the use of Average rate for conversion of currency from USD to INR reasoning that the same keeps on fluctuating. The TPO objected to the use of a single invoice for comparison. Thus, the TPO rejected appellant's methodology and conducted a search for external comparable companies to determine the ALP with GP/Sales margin as the profit level indicator. The TPO selected 14 companies as comparable to appellant. T....
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....ort. The appellant has shown that it does not assume any significant risk such as market risk, inventory risk, collection risk, quality risk, foreign exchange risk etc. as it is not required to maintain any inventory, no credit risk since sales are backed by letter of credit (LC) and both purchases and sales are made in USD as is evident from details of purchase sales, supported contract and purchase and sales invoice. Further, there is no requirement to involve any working capital in these transactions in view of the fact that there was no requirement on the part of the appellant to maintain inventory in view of sales backed by LC in case of HRCF coil and payment to be made to AE after receipt of payment from customer in case of steel slab. 7.11 Further, it is observed from the FAR analysis of impugned transaction and the FAR analysis of trading transaction on commission basis carried out by the appellant shows that the transaction of trading of steel slabs and HRCF coil are akin to trading of similar material carried out by appellant on commission basis with AE. The appellant earned commission amount on trading of steel material which are similar to the margins earned fr....
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....al by only about Rs. 15,000/. Thus, this issue raised by the AO is not material and the observations of TPO in this regard are not based on proper appreciation of facts. 7.14 The TPO has observed only one invoice is taken for working out ALP. It is observed that as per sub-clause (i) of Rule 10B(1)(b), either "a comparable uncontrolled transaction", or "a number of such transactions" can be used for the application of RPM. Therefore, the TPO's objection is legally not justified. Further, it is observed that the comparable uncontrolled transaction is a material transaction in comparison to the impugned transaction i.e. 138% of actual transaction in case steel slab and 33% of actual transaction in case of HRCF coil. Therefore, the objections of TPO in this regard, are not justified, on facts and in law. 7.15 The TPO has observed that for purchase of HRCF coils, there is a time gap of approximately two months between the date of sale and date of purchase. It has been shown that there is no time gap between the date of sale and date of purchase in the impugned transaction. As per facts on record arising from sales and purchase contracts and invoices, the appellant....