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2015 (6) TMI 94 - AT - Income TaxAddition u/s 92 - CIT(A) upholding the arm's length brokerage rate for yarn product at 2% as determined by Ld. AO as against 0.75% actually received by the appellant - whether 2nd proviso to section 92C(3) merely requires an "opportunity of being heard" to be given to assessee and nothing beyond that as held by CIT(A) - Held that:- Since the costs of all the raw materials is picked up by the assessee for all effective purposes. the transaction is actually between the assessee and the Diageo group concerns supplying the raw material to the CBU, and since the assessee as also these vendors are admittedly under the control of Diageo PLC, the transactions are clearly between the associated enterprises The objection raised by the assessee to the effect that the transactions of imports of raw material by the CBU, i. e. Konkan Agro, from Diageo group entities cannot be treated as international transactions between the associated enterprises, therefore, is rejected. There is no denial of the fact that Mr. Govind Karunakaran is Director and 99.9% shareholder of the assessee company and also is a Director and Chief Operating Officer of Kaybee Exim Pte Limited, Singapore. Therefore, Mr. Govind Karunakaran is not only participates in management of both the companies by he is holding the key position in the management of Kaybee Exim Pte Limited, Singapore and is part of decision making process of the said company since 1996. Shri Govind Karunakaran is a common director in both the company and participating in the management of both the companies not for the name sake but he is holding the key position in taking decision being a Chief Operating Officer of Kaybee Exim Pte Limited, Singapore and almost the entire shareholding of the assessee company, therefore, the condition of one enterprise participates directly or indirectly or through one or more intermediaries in its management or control or capital as prescribed under clause (a) & (b) of s.s. (1) of section 92A is satisfied. Hence, the assessee and Kaybee Exim Pte Limited, Singapore falls under the meaning of AEs as per the provisions of section 92A. - Decided against assesse. TP adjustment on account of service charges/commission received by the assessee in respect of procurement of yarn on behalf of Kaybee Exim Pte Limited, Singapore (AE) - held that:- The arm’s length price in relation to an international transaction shall be determined by any of the method prescribed u/s 92C of the Act, therefore, in order to determine the arm’s length price, the comparable uncontrolled price has to be considered as per the appropriate method applied in a particular case. In the case in hand, the A.O. has not determined the arm’s length price by taking into consideration an uncontrolled price or uncontrolled transaction. The A.O. has adopted the price being the commission received by the assessee in respect of textile procurement from its AE for the purpose of arm’s length commission for procurement of yarn, therefore, the price/transaction adopted by the A.O. is not an independent or uncontrolled price or transaction but it was a controlled transaction between related parties. Hence, the arm’s length price adopted by the A.O. is not sustainable as per the provisions of the Act. - remit the issue to the record of the A.O. for determination of the same afresh - Decided in favour of assesse for statistical purposes. Disallowance of society charges and property tax - as per AO the lease agreement is silent on this ground - Held that:- When the assessee has made the payment of property tax and society charges for the premises used for the business of the assessee, then, in the absence of any facts or material brought by the A.O. on record that the said payment was made by the assessee contrary to the terms and conditions of the agreement or on behalf of the owner of the property, then, the A.O. has proceeded only on the assumption and not on any tangible material or fact. Though the issue was decided by the Commissioner for the A.Y. 2004-05, however, the said order was not challenged before the Tribunal. We find that neither the A.O. has conducted the enquiry nor the assessee has produced any evidence in support of the claim that this payment was made by the assessee as per the mutual understanding. This issue required proper examination and verification -remit the issue to the record of the A.O. for determination of the same afresh - Decided in favour of assesse for statistical purposes.
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