Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2014 (11) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2014 (11) TMI 262 - AT - Income TaxTransfer pricing adjustment – Determination of ALP – Held that:- The ALP in almost all the (nonpurchase) transactions has been determined at nil either in view of the assessee being not able to furnish the complete details or because the Revenue is of the view that there was no economic justification for the assessee to have incurred the relevant expenditure - The payments to, and the assistance from the AE having crystallized, it is the operating margin as obtaining that is to be determined, and on the adequacy of which, i.e., with reference to that of the comparables, reckoned on an average, that the TP adjustment, if any, shall arise - the reason/s for effecting the adjustment notwithstanding, the TNMM at the entity level shall substitute as the most appropriate method for all the international transactions. Validity of the comparables - ADS Diagnostics Ltd. - Held that:- The company has two segments, namely medical diagnostics services and trading activities - The trading, which is also in the health care segment, is of high-end medical equipments, viz. bone denstimeters, digitizers, mammographic equipments - The other ground on which the assessee seeks to distinguish its case is that the said company has also commission income. As such, without prejudice, even if the said company is considered as a comparable, the income ought to be excluded while drawing the comparison, doing which would reduce its income to 1.36% - the company was also engaged in distribution of medical devices and equipments - The commission income was only marginal - Both the assessee and the comparable are operating in the health care segment, dealing in premium products - The commission is only on the distribution activity, so that the income is essentially against services relating to distribution activity - The assessee’s business profile, which also includes marketing, pre/after sales and training services, thus matches with the comparable. Advanced Micronic Devices Ltd. – Held that:- Given the broad range of the assessee’s activities (and functions), its’ stating of being a limited risk distributor is internally inconsistent, if not anomalous - both the aforesaid comparables have been rightly included in the list of comparables by the Revenue, resulting in the profit level indicator (PLI), which has been accepted as the operating margin on sales, at a mean of 8.88%. Adjustment of business development expenses and disallowance made u/s 37(1) – Held that:- All the expenditure incurred by the assessee during the year and, therefore, including on the WT event, shall form part of its operating statement for the year, even clarifying that even where any such expenditure stands directly recovered, the same would need to be incorporated in the operating statement - The assessee, as a part of its business profile, is to market, sale and distribute the principal’s products, as well as provide technical services related thereto. The participants are all doctors from India - the assessee claims a quantum increase in both its’ sale as well as customer base, i.e., for the relevant year, vis-à-vis the immediately preceding year, with the most of the new customers being participants of the event - The assertions have not been rebutted by the Revenue in any manner - an incidental third party benefit would not oust the claim the claim for deduction u/s. 37(1) – Decided in favour of assessee. Provision for obsolete and non-moving inventory disallowed – Provision for sales return – Held that:- The drop in the sale value (Rs.7.74 lacs), separately provided, forms only a part of the total provision of ₹ 70.65 lacs, so that the basis for the balance, stated to be a provision toward non-moving and slow items, would need to be ascertained and verified - This would also meet the Revenue’s objection, which, in essence, states of the provision being contingent and not based on facts – thus, the matter is to be remitted back to the AO for examination – Decided in favour of assessee.
|