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2014 (4) TMI 621 - AT - Income TaxTransfer pricing adjustment – Purchase of raw materials from AE - Determination of ALP – CUP method appropriate or not – Held that:- The TPO has wrongly rejected the quotations from Asian Metal - Asian Metal is one of the leading Marketing Researcher - Asian Metal is one such website which is used for obtaining metal prices - TPO considered the price of Molybdenum Oxide which is a final product to that of raw material purchased by the assessee - Fundamentally, the comparison itself is wrong - assessee also justified the prices paid on the basis of quotations and adjustments being made for the Ex-works quotation to the CIF quotations of the assessee - Thus, there is an internal CUP in the form of actual price paid to third parties by the Holding company with mark-up and it also justified by external CUP by way of Asian Metal Quotations with due adjustments - Relying upon Destination of the World (Subcontinent)(P.) Ltd. Vs. ACIT, Circle 10(1), New Delhi [2011 (7) TMI 576 - ITAT, DELHI] - in the first instance, attempt should be made to determine arm's length price of controlled transactions by comparing same with internal uncontrolled transactions undertaken in same or similar economic scenario. No attempt has been made by TPO to make FAR analysis and give necessary adjustments required to make them comparable. Even the calculations made by the TPO are found to be wrong by the DRP - DRP's working in determining the ALP amount is also not correct - Once the amount of imported material is taken in its entirety for its comparison, why there is a requirement to add further amount for the amount utilised in the production is not explained – thus, selection of CUP is the appropriate method and the assessee has both details for internal CUP as well as external CUP - CUP method should have been adopted as most appropriate method for comparing purchase price of the raw materials of Molybdenum acquired by the assessee from AE - Assessee justified the price paid by way of internal CUP in relation to actual price paid to third parties by M/s. KTC Korea and the mark-up invoice wise and also compared with reference to the external CUP in relation to Asian Metal Quotations – thus, the matter is remitted back to the TPO to examine the assessee’s contention and for fresh adjudication – Decided in favour of Assessee.
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