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2015 (11) TMI 269 - AT - Income TaxTransfer pricing adjustment - leverage of 5% disallowed - whether assessee is entitled for the benefit of + 5% tolerance margin for the purpose of determining the arm’s length price of the international transaction as variation between the arm’s length price computed by the Transfer Pricing Officer and price at which the international transaction has actually been undertaken which does not exceed 5% of the latter? - Held that:- Second proviso to sec 92C(2) is to be read independently. The lower authorities instead of following above second proviso followed the first proviso. Being so, the Transfer Pricing Officer wrongly came to the conclusion that leverage of 5% is not allowable to the assessee’s case where once price based on a particular method of arm’s length price is not applicable. Accordingly, we are in complete agreement with the claim of the assessee with regard to benefit for the adjustment of + 5% variation, while computing the arm’s length price. This ground of the assessee is allowed. The transfer pricing officer is not justified in comparing with the average price published by the cashew bulletin of cashew export council with that of price mentioned in individual transaction for the products. Accordingly, we direct the TPO to compare the average monthly price to the product published in cashew bulletin with the average price charged by the assessee for its product and decide accordingly. - Decided in favour of assessee. Disallowance of interest - assessee has computed interest on all the import transactions at the Bank Rate of 12% on the credit term in excess of 30 day - Held that:- The contention of the ld. Departmental Representative is that for importing cashews from its Associated Enterprises from Benin, the assessee paid more than the price mentioned in the CEPC Journal (External data), so the Assessing Officer made transfer price adjustment. The plea of the assessee is that the assessee availed 150 days credit for payment. Being so, the price was charged little more than the rate mentioned in the CEPC Journal (External data). If due credit is given to interest @12% for the credit period, there is no necessity for TP adjustment. This plea of the assessee is correct. In our opinion, due weightage is to be given towards interest benefit enjoyed by the assessee by availing credit for 150 days for payment and Rule 10B(1)(a)(ii) of the Income Tax Rules, 1962 also permits such benefit to the assessee. Hence, the lower authorities are not justified in making such adjustments. This ground is allowed.- Decided in favour of assessee.
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