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2011 (6) TMI 130 - AT - Income TaxAddition - Adjustment in international transaction - the assessee's major sales in international market related to associate enterprise section 93E was applicable and a report in Form 3CEB was duly filed along with the return of income by the assessee - The A.O. invoking the provisions of section 92C(3) of the Act made addition of Rs. 19,72,697 by making upward adjustment in international transaction with the associate enterprise on the ground that similarly placed companies had better margins as compared to the assessee company - While doing so, the A.O. took the net profit of the assessee company at (-) 3.21% instead of 3.26% shown by the assessee, excluding the other income of Rs. 80,28,677 from net profit declared by the assessee - A.O. while holding that similarly placed companies had better margin as compared to assessee company, has not done the same exercise i.e. other income of those companies had not been excluded from their net profit, which according to us, is not proper - Further find that full data of the companies with which assessee's profit margin was compared, was not provided to the assessee company - On the other hand, the data of five companies which were engaged in the similar type of business, provided by the assessee to the A.O., was totally ignored for no cogent reason - therefore, of the considered opinion that the matter requires fresh adjudication by taking the average of net profit shown by the companies considered by the A.O. while making this upward adjustment and the companies on which assessee has placed reliance to show that transaction between the assessee company and its principal was at arm's length price - While doing so, similar figures of all the companies should be taken into consideration. In case, other income of the assessee is excluded form the net profit, the other income of comparable companies should also be excluded from their net profit. With these observations, the matter is restored back to the file of the A.O. for fresh adjudication after giving opportunity of being heard to the assessee.
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