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2013 (11) TMI 1320 - ITAT KOLKATASelection of comparable for determining Arms Length Price in Tranfer Pricing Transaction - Whether MALCO is comparable to the assessee for the purpose of determining of arm's length adjustments, if any – Held that:- When comparing the aluminium coil MALCO itself recognizes that the Properzi wire rods has higher realization and MALCO is relatively small compared to other domestic majors. In the case of the assessee, substantial portion of its production is in aluminium coils and other items – On the above ground MALCO cannot be treated as comparable to the assessee - In the case of MALCO the identical product which is being used for comparing MALCO to the assessee being aluminium rolled product represents just about 8% of the total turnover of MALCO – In view of above, MALCO cannot be used as comparable for determining the arms length price in the case of the assessee. MALCO has captive mines for extraction of its raw material whereas the assessee has to procure the raw material from the open market - A perusal of the costing of raw-material shows that in the case of MALCO the value of raw material consumed being bauxite is at 347563 MT is Rs.14.04 crores as against in the assessee's case the aluminium ingots and sheets are 25845 MT costing Rs.266 crores - This itself clearly shows that the very foundation of the manufacturing process being the raw materials are difference in the case of MALCO and the assessee - MALCO is manufacturing aluminium ingots and trading in aluminium ingots also whereas the assessee's primary raw material is aluminium ingots. Thus even on this ground MALCO cannot be treated as comparable to the case of the assessee. MALCO is a debt free company, insofar as it has a debt of only Rs.21.77 crores as against Rs.184 crores in the case of the assessee - The interest cost in the case of MALCO being Rs.77 lakhs as against Rs.30 crores in the case of the assessee would make a substantial dent in the profit - Net result of the Transfer price adjustment is an amount of Rs.19.34 crores. If the adjustment in respect of annual financial charges are made then this differential would get completely wiped out as the differential in the interest burden is Rs.30 crores in the case of the assessee whereas it is only Rs.77 lakhs in the case of MALCO – Thus, decided in favor of Assessee.
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