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2011 (1) TMI 151 - AT - Income TaxTransfer Pricing - Arms length price - Resale price method - importing rough diamonds from abroad and selling the same in India - business of trading (no value addition) - The Transfer Pricing Officer passed an order under section 92CA (3) and held that the imports made from the assessee’s Associated Enterprise is not in accordance with the transfer pricing guidelines and held that arms length price adjustment is required to be made to the imports - Held that: The A.O. himself states that, he find some merit and force in the submission of the assessee, but in view of the directions of the T.P.O. and as the assessment is getting time barred, he made the addition in question. The submission of the assessee that, the T.P.O. is not authorised to determine the net operational profits at the enterprises level and thereby determine the total income of the assessee, but that he shall determine only, the ALP of the international transaction is correct. Resale price method - neither the Transfer Pricing Officer nor the CIT(A) have held that, this is not the most appropriate method. The only ground for rejecting resale price method adopted by the assessee is that the comparables are wrongly chosen - Held that: As the assessee is a trader, without value addition to the goods, we find force in the submission of the assessee that resale price method is the most appropriate method for determining the ALV with respect to AE transaction. - as the comparables given by the assessee i.e., Flawless Diamonds and Professional Diamonds are not in the business of purchase and sale of rough diamonds, it would have to set aside of the issue to the file of the Assessing Officer for fresh adjudication, so as to enable both the assessee, as well as the Assessing Officer to undertake a fresh exercise, by finding out appropriate comparables, and adopting resale price method. Variation upto 5% - The second proviso to s. 92C(2) (as substituted by F (No. 2) Act, 2009 w.e.f 1.10.09) clearly shows that if the difference is less than 5% then the actual price paid should be considered as arm’s length price. The Transfer Pricing Officer as well as CIT(A) have clearly observed that difference in respect of these two items is 4% and, therefore, same has to be reckoned in terms of second proviso.
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