Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2012 (4) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2012 (4) TMI 288 - AT - Income TaxTransfer Pricing – rejection of PLI considered by the appellant in the transfer pricing documentation – benefit of 5% adjustment – assessee engaged in the business of manufacturing automobile catalysts – AY 2003-04 - Held that:- Principal of res judicata cannot apply in case of Transfer Pricing and it is open to authorities to adopt different and appropriate PLI. PLI are the ratios that measure relationship between profits with costs or resources. Use of a particular PLI depends on a number factors including, nature of activities of tested party, the reliability of available data with respect to uncontrolled comparables and the extent of which the PLI is likely to produce available measure of income. The PLI is selected with its appropriateness for the transaction under view. With regard to nature of business of assessee, ROCE is not appropriate PLI. Further, purchase cost of the raw material cannot be said to be a pass through cost as assessee claims. Hence, operating profit as a percentage of total cost has to be the basis instead of operating profit as a percentage of the total cost minus raw material cost. Benefit of ± 5% adjustment – Held that:- Such benefit cannot be considered to be a standard/universal deduction. This benefit is available only if ALP shown by the taxpayer falls within ±5% of arithmetic mean of more than one price determined by the Most Appropriate Method. As the taxpayer was not falling in above range, it was not entitled to any benefit. Secondly, the option is available only when taxpayer is computing the ALP and not when: AO /TPO is computing the ALP – Decided against the assessee.
|