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2013 (8) TMI 75 - ITAT HYDERABADTransfer pricing adjustment - reference to TPO - whether there existed an AE relationship between the assessee and M/s O&S Metal Import GmBH - Held that:- The assessee has to establish that the assessee company has exported goods to other parties on similar prices and conditions & most importantly, evidences are to be brought on record by the assessee to show that the prices and other conditions were not influenced by M/s O&S Metal Import GMBH. That M/s O&S Metal Import GMBH had no share holding or control or management of assessee company in the impugned assessment year has to be verified by the AO. Hence, the issue to be remitted the file of AO to determine whether there existed an AE relationship between the assessee and M/s O&S. Metal Import GmBH. As held in Sanchez Capital Services vs. ITO (2012 (10) TMI 285 - ITAT MUMBAI) the mere filing of Form 3CEB by the assessee does not automatically imply that S.92A conditions were satisfied and there is an AE relationship. Rather, the specific facts and circumstances of the case have to be analyzed in order to conclude whether or not an AE relationship actually exists - in favour of revenue for statistical purposes. Rejection of Most Appropriate Method (MAM) adopted by the assessee-company as Cost Plus Method (CPM) for determining the Arm's Length Price - Held that:- When the assessee has chosen a Most Appropriate Method (MAM) and substantiated the choice in its TP study, it is up to the TPO to record and substantiate the reasons as to why the assesse's MAM is incorrect and why some other TP method needs to be the Most Appropriate Method (MAM). In the instant case however no substance in any of the TPO's multiple arguments for rejection of assessee's internal CPM and adoption of external TNMM. Also as decided in DIT (Intl. Taxation) vs. Morgan Stanley (2007 (7) TMI 201 - SUPREME Court) "the most appropriate method has to be applied for computation of the arm's-length price. It will depend on facts and circumstances of each particular international transaction....". Applying this ratio internal CPM seems to be the Most Appropriate Method (MAM) rather than external TNMM. In favour of assessee. Whether a sick company under BIFR would be erroneous to compare it cursorily using external TNMM - Held that:- Correct comparability analysis would be a non-trivial exercise and the entire TNMM application is bound to be sub-optimal. Given that internal CPM is available and easily applicable in the instant case, no merit in applying external TNMM in the instant case. In favour of assessee. Adjustments during the computation of the arm's-length price - whether be restricted only to the international transactions and not to the entire turnover of the assessee? - Held that:- As decided in Lionbridge Technologies (P) Ltd. vs. DCIT [2012 (8) TMI 326 - ITAT, MUMBAI] assessee entered into international transactions with its AEs and also non-AEs and transfer pricing adjustment can be made only with reference to the international transactions with the AEs and not non-AEs. Thus AO is directed to restrict the adjustments, if any, only to international transactions. In favour of assessee. No need for provision of +/- 5% range for CPM of the arm's-length price as there are no comparable prices in the instant case providing a set or range of multiple prices to be addressed by the +/-5% range. Against assessee.
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