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2010 (3) TMI 872 - AT - Income TaxTransfer pricing - Computation of arm’s length price - TNMM method - HELD THAT:- We find that the TPO and the CIT(A) have assumed similarity of markets and economic conditions and have made adjustments only for the volume discount, credit offered and a small adjustment of credit risk. They have completely ignored the disparate economic and market conditions of Thailand and Vietnam and have made no adjustment for the same. Mere geographical contiguity of two countries need not mean similarity in economic or market conditions. How can the sale prices to wholesale agents in two different countries be comparable, when the sale price to the final user in one country is less than the sale price to the whole sale agent in another country, unless adjustment for the same has been considered. Thus, the adjustments merely for volume offtake, credit period and credit risk, though material are not sufficient to make the sale price to AE in Thailand comparable with the sale to unrelated party in Vietnam. Scope of adjustments has to be widened and all the submissions of the assessee regarding the disparity between the two transactions should be considered and suitable adjustments made for the same. With the directions, the issue is set aside to the file of the ld. CIT(A) for deciding the matter afresh after giving reasonable opportunity to the assessee to present their case. In the result, the appeal filed by the assessee is allowed for statistical purposes. Disallowance on expenditure - ‘Other expenses’ - We find no infirmity in the order of the ld. CIT(A) as ad hoc disallowance out of the business expenditure cannot be sustained. Following the ratio of decisions in the case of Sunder Mal Sat Pal v. ITO [2005 (1) TMI 312 - ITAT AMRITSAR] and Ravi Marketing (P.) Ltd. v. CIT [2005 (1) TMI 20 - CALCUTTA HIGH COURT], we dismiss this ground of revenue. In the result, the appeal filed by the revenue is dismissed.
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