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2016 (8) TMI 1182 - AT - Income TaxSelection of a non-resident entity as a tested party - matter refereed to special bench - Held that:- The successive Presidents of this Tribunal have consistently taken a position that in a situation in which the same issue is pending before the Hon’ble High Court in assessee’s own case, a special bench cannot be constituted to decide that issue. Thus we reject the contention of the learned Departmental Representative, and decline to refer the issue regarding selection of a non-resident entity as a tested party for the consideration of a special bench. Economic analysis undertaken by the Appellant in the transfer pricing documentation should be accepted and no adjustment should be carried out in relation to the intercompany transaction of import of parts and components. TPA - ALP adjustment in respect of royalty paid by the assessee to its Korean AE - Held that:- given that there has been no change in the nature and terms of the international transaction of payment of royalty entered into by the assessee, there is no justification for taking a different view on a fundamental issue i.e. choice of the transfer pricing method when there are similar facts and hence, in line with the earlier year, internal CUP should be accepted as the most appropriate method for the current financial year. The above contention is in addition to the detailed objections filed by the assessee in the original proceedings before your goodself and learned DRP. Clearly, even in this round of proceedings, the assessee did not have much to say on the external comparable given by the TPO. Once an assessee is given a comparable instance an opportunity to explain as to why such a comparable should not adopted, and yet assessee remains quiet on the issue, it should not be open to him to be aggrieved of the same external comparable being adopted. No other material is on record to show that the assessee made any efforts to demonstrate that the said external comparable for CUP is not comparable with the facts of this case. Undoubtedly, a particular stand was taken in the assessment year 2005-06 but that was a stage in which no external comparable was available to the TPO. Now that an external comparable as CUP input is available, and the assessee has not made any efforts to show as to this CUP input in different in respect to the royalty transaction undertaken by the assessee, such an external comparable can indeed be accepted. We see no infirmity in the same and we, therefore, confirm the action of the TPO on this count. Disallowance on account of provision for obsolete inventory - Held that:- In principle there is no need to interfere in the matter as the Tribunal, in assessee’s own case, has held that the market value of such obsolete stock etc, which was quantified at 3.2%, is to be taken into account in computation of income. That is precisely what the Assessing Officer has done. However, in case the assessee can demonstrate that this residual value of the slow moving stock and inventory has been taken into account in computation of provision, to that extent, the disallowance will stand deleted. Disallowance on account of slow moving or obsolete staff - Held that:- It is not in dispute that all the material facts and circumstances of the case are similar to that of the assessment year 2006-07 discussed above. In this view of the matter, and respectfully following our findings for the assessment year 2006-07, this issue is also remitted to the file of the Assessing Officer, and it is directed that the directions for the assessment year 2006-07 will apply mutatis mutandis for this assessment year as well. With these directions, this issue stands restored to the file of the Assessing Officer.
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