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2019 (3) TMI 1028 - AT - Income TaxTP adjustment - computation of the Arm’s-Length Price (ALP) - MAM selection - bench-marking - CUP method VS TNMM method - business of export and import of chemicals - assessee succeeds in providing appropriate data relevant for comparison under the CUP method - HELD THAT:- As relying on assessee's own case [2014 (3) TMI 885 - ITAT DELHI] we hold that The CUP is the most appropriate method to be applied for the international transactions of import and export of traded goods of the assessee. The assessee is required to support the international transaction by authentic documents which may also include quoted prices - the assessee may support its international transactions benchmarking analysis by the other method u/s 92C(1)(f) of the act which is held to be retrospective by the decision of the coordinate bench. In the event assessee fails to adduce and support its transactions under CUP method or under the sixth method then ld TPO and AO are entitled to resort to other method of benchmarking and comparability analysis after granting assessee a proper opportunity of hearing. Assessee is directed to produce before ld AO/ TPO quotations which it would like to rely upon, prove them to be authentic, genuine, comparable with the terms and conditions of international transaction especially with respect to quantity and geographies and adjustment with respect to FOB value. Assessee shall also produce the benchmarking methodology before the ld AO/ TPO.AO/ TPO is directed to examine the same, and if found in accordance with law, then test the benchmarking made by assessee and compute ALP. In case AO is not satisfied with the same, before doing so ld AO/ TPO will give adequate opportunity of hearing to the assessee to prove its case, Then he may decide issue on merits in accordance with law applying any other appropriate method including TNMM. Adjustment to the international transaction of ‘provision of business support services’ - comparable selection - applied the ‘Cost plus Method’ taking 5% margin - HELD THAT:- Merely based on some judicial precedents in case of some other assesses, comparables can neither be included nor excluded. It will lead to strange situations, where one comparable excluded in one case, would always be excluded universally in all other cases. Approach of decided on inclusion or exclusion of comparables based on judicial precedents, on one day will leave assessee as well as revenue with zero comparables. One day this approach will make the comparability analysis redundant and unworkable. Therefore, paramount is Functions performed by assessee to be compared with that of comparables for comparability analysis. It is apparent that without first analyzing the functions performed by the assessee for this business segment, the assessee has compared the margins/profit level indicator of those comparables with the assessee’s own PLI. This is not acceptable as it amounts to putting the cart before the horse. In view of this, we set aside the whole issue back to the file of the learned Transfer Pricing Officer to first capture the functions performed by the assessee for this business segment supported with the relevant evidences such as agreements, bills, invoices, correspondences etc of such functions performed, and carry out fresh search of the comparable as per filters adopted by the learned Transfer Pricing Officer and compare the Profit Level Indicator of such comparable with the assessee’s profit level indicator and show that IA are at arm’s length. Disallowance on account of provision for doubtful debts - AO was of the view that the above provision is not an ascertained liability and therefore the same was added to the total income of the assessee as disallowance - HELD THAT:- The complete details of such bad debts are provided wherein the details concerning 130 parties were mentioned. There are many credits which have been written back and there are many debits which have been written off , net sum of the above transaction is debited to the profit and loss account as bad debts of INR 9359406/-. Naturally, the above debit has been made to the profit and loss account. Therefore, they are written off in the books of accounts. Those details were already available before the assessing officer during the assessment proceedings. However, the learned AO did not care to verify them Even despite the specific direction of the learned Dispute Resolution Panel, the learned Assessing Officer did not look into the details submitted by the assessee. It was also not known to us whether the Assessing Officer has issued any letter to the assessee to explain the above claim. In view of this, we direct the learned Assessing Officer to examine the details submitted and test it on the grounds of allowability of bad debts according to Section 36 (2) Computation of amount of set off of brought forward losses and unabsorbed depreciation of earlier years - HELD THAT:- We direct the assessee to produce the correct details of the amount of unabsorbed depreciation and amount of brought forward losses to be set off against the income with proper evidences which may be verified by the learned assessing officer and if found correct, the assessee should be granted the benefit of the same
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