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2016 (1) TMI 1381 - AT - Income TaxTPA - comparable selection - Held that:- Assessee is the sole distributor of spare parts, components and accessories for Honda products and the responsibility of the assessee is to ensure that such spare parts, components and accessories are available for the end-customer through replacement market, thus companies functionally dissimilar with that of assessee need to be deselected from final list. The facts and functions of the assessee have not been properly reported by the assessee and resultantly have not been appreciated and adjudicated upon by the TPO. The function of distributor has to be treated differently from the function of job order manufacturer of spare or cases where there is value addition. Hence, the facts of the case, the functional profile etc. have to be examined afresh to arrive at the correct A.L.P. As directed: a) RPM is the MAM for the Distributor/trading segment. In our view, this method has to be preferred to other methods. Thus, we uphold the finding of the DRP for the segment where value addition is made to imported spares, and in case where procurement is done by placing job work orders, fresh adjudication is to be done de novo to determine the MAM. c) The burden is on the assessee to substantiate its claim of value addition etc. with facts and figures. d) Internal comparables are to be preferred to external comparables for the distribution segment, wherever appropriate data is available. Adjustment with regard to customs duty and marine freight & insurance charges incurred with regards to imported goods - Held that:- The claim for adjustment for marine freight and insurance cannot be allowed as such costs would also be present in bad purchase. This is rejected as far as statutory levies, imposed by the Indian Customs authorities, are concerned which is not the case with locally procured goods. In case of locally procured goods, excise duty is payable. The difference between the rate of custom duty and the rate of excise duty may be considered for adjustments as these are statutory levies. Such adjustments may have to be considered while comparing the net margins of imported goods vis-a –vis locally procured goods. Allow this ground of the assessee to the extent indicated above and direct the TPO to adjust for the difference in statutory levies.
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