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2011 (9) TMI 279 - AT - Income TaxTransfer price adjustments - Arm's length price (ALPT) - Associated Enterprises (AE) - Held that:- The expression used in the statute is 'participation in control or management or capital', but essentially all these three ingredients refer to de facto control on decision making. In terms of the basic rule thus, whether one enterprise controls the decision making of the other or whether decisions making of two or more enterprise are controlled by same interests, these enterprise are required to be treated as 'associated enterprise'. - In this view of the matter, as also bearing in mind entirety of the case, the relationship of AEs exist between the assessee, the CBU and Diegeo group entities from which raw materials were purchased by the CBU. - the transactions are clearly between the associated enterprises. - Decided against the assessee. Comparabe cost - Held that:- segregating all spirits other than whiskey and comparing the results in that segment with the results of whiskey segment would not be appropriate. - As we have rejected the comparability itself, we see no need to deal with this issue of comparing financial results of OTW segment with whiskey segment any further. - however AO directed to allow adjustment of + 5 per cent in terms of the proviso to section 92C. To sum up, so far as grievances regarding arm's length price adjustments are concerned, we delete the addition of ₹ 31.54 crores in respect of alleged brand promotion of AE and we partly confirm the addition of ₹ 1.20 crores in respect of ALP adjustment made to purchase of raw materials from Diageo group entities, by CBU of the assessee. - Decided in favor of assessee partly.
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