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2016 (11) TMI 1660 - AT - Income TaxTP Adjustment - upward adjustment made on the value of its international transactions with its Associate Enterprises (‘’AEs’’) - MAM selection - Lower authorities selecting CUP method over TNM method - geographical difference between supplies made to Associated Enterprise and Non Associated Enterprise - HELD THAT:- When uncontrolled comparables are available internally on some of the items which was sold to Associated Enterprise then such comparables would form a separate class of its own. TPO had considered forty nine thread types for which there were internal uncontrolled transactions available for comparison. TPO had not made an adjustment for any of the other varieties of thread sales made by the assessee to its Associated Enterprise. We do find that atleast for eight items among these forty nine thread types, mentioned at Sl. No.27,28,30,35,37,38,39 & 44, there was negative differences adjustment which were ignored by the TPO, in the work out at annexure A of its order. When a class of items are considered for adjustment, the negative effect of some of the items therein cannot be ignored. As for contention of the assessee is that there were geographical difference between supplies made to Associated Enterprise and Non Associated Enterprise, there is a clear finding by the ld. DRP that assessee was catering to Asian countries and Associated Enterprise were located in Sri Lanka, Mauritius, Pakistan and Egypt and Non Associated Enterprises were located in Srilanka, Bangladesh, Malawi etc with not much of a geographical difference. Viz-a-viz volume discount mentioned by the ld. Authorised Representative, ld. DRP had given a clear finding that there were substantial sales in alteast in five items falling in the table appearing in para 2.10 of its order. Considering all these, we are the opinion that lower authorities were justified in selecting CUP method over TNM method. However, as mentioned by us, computation of the Arms Length Price adjustment required on forty nine number of items mentioned in the order of TPO requires to be reworked, so that negative amounts are also considered for aggregation and for working out the Arms Length Price adjustment that is required. For this limited purpose of recalculation, we remit the issue back to the file of the Assessing Officer/TPO. Downward adjustment on commission paid to its Associated Enterprises - payment was for agency commission or management commission fees - HELD THAT:- As already noted by us the orders on which commission was paid was only on items sold to group concerns and not to any third parties. There is much strength in the argument of the ld. Departmental Representative that in such a situation onus of the assessee was much more than in a scenario where orders on which commission was received were on supplies to third parties. Assessee had failed to discharge this. Consolidation of fragmented orders could have been done by the assessee itself and did not require services of an Associated Enterprise or knowledge of any sublims stalls. When assessee was unable to bring on record anything to show for what reason agency commission was paid, in our opinion there arose an exceptional circumstance where by Arms Length Price could be taken as Nil. As for decision of the Delhi Bench of the Tribunal in the case M/s. McCann Erickson India (P) Ltd [2012 (7) TMI 728 - ITAT, DELHI] strongly relied by the ld. Authorised Representative, assessee therein was able to demonstrate the type of services, description of service and benefits received by the it from its Associated Enterprise. Further, the payment was not agency commission but management commission fees. In the host of other judicial decisions relied by the ld. Authorised Representative also the question dealt was on the management fees and not on agency commission. In these circumstances, we do not find any reason to interfere with the orders of the lower authorities
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