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2014 (1) TMI 395 - AT - Income TaxArm's length price for purchase of raw material - Held that:- When the services rendered by the MKR is inseparable and composite ie FPF, the TP studies should also be done after considering all the price components of the said services - In ALP studies, the assessee needs to travel extra mile to demonstrate that the “raw material purchase price” of the assessee is at arm”s length after considering the entire cost attributable to the said purchases by the assessee - TPO cannot restrict his TP studies to only to the international transaction of reimbursements. In the fresh TP studies, the assessee needs to consider the composite transactions ie purchase cost incurred by the MKR, finance cost incurred by the MKR, administrative cost incurred by MKR, corporate guarantee commission etc - The duty of the TPO is determine the ALP and not to determine the justification of the said payments claimed by the assessee - The TPO has gone into the justification issues ie if the said reimbursement is rightly paid or not by the assessee - TPO must determine the ALP after merging all the relevant cost segments. His aim should be to determine after making requisite and appropriate adjustments - The MKR is not just a material seller to the assessee - The approach of the TPO cannot be appreciated in accepting - The “international transactions” involving the payment of cost for import of the raw materials and rejecting the reimbursement of the finance cost, interest cost etc amounting to Rs 17.81 cr and not charging of the “corporate guarantee commission” on the MKR - The TPO must determine ALP of the purchase price of the raw material as a whole after considering all the relevant segments of the price ie purchase cost, administrative cost and the finance cost and interest cost, guarantee commission etc. Regarding the principle of “commercial expediency” – Following SA Builders [2006 (12) TMI 82 - SUPREME COURT] – The issue was restored for fresh adjudication - AO/TPO is directed to consider the said judgement and pass a speaking order on this issue.
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