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2018 (10) TMI 1863 - AT - Income TaxTP Adjustment - Selection of MAM - TPO rejecting Transactional Net Margin Method and instead applying Cost Plus Method [“CPM”] as the most appropriate method - disregarding requirements of Rule 10B and 10C of the Income-tax Rules, 1962 [“the Rules”] - HELD THAT:- As relying on PINO BISAZZA GLASS PVT LTD [2015 (10) TMI 2793 - ITAT AHMEDABAD] we allow the appeal preferred by the assessee by remitting the matter to the file of the Ld. Assessing Officer for de novo assessment where the assessee will raise their contentions on merit on ascertainment of Arms Length Price under the Transactional Net Margin Method as the assessee may deem fit. The Ld. Assessing Officer is further directed to decide the issue afresh in the light of the directions given by the Co-ordinate Bench as mentioned hereinabove. Upward adjustment on account of ALP interest that was required to be charged by the assessee company from the associated enterprise in view of delay in realization of sale invoices beyond the credit period extended by the assessee company - HELD THAT:- Issue decided in own case [2013 (8) TMI 332 - ITAT AHMEDABAD] The credit period for finished goods cannot be compared with credit period for unfinished goods and raw materials, and in any case, when products are not the same, there cannot be any question of prices being the same. Unless the prices of the product and the product are the same, and yet extra credit period is allowed, there cannot be any occasion for making ALP adjustment on the basis of the excess credit period. None of the authorities below have even disputed that the ingredients, raw materials and semi-finished goods sold to Micro USA are not sold to any other concern. The very foundation of impugned addition in arm's length price on account of excess credit period is thus devoid of any legally sustainable merits or factual basis. When all these factors were pointed out to the learned Departmental Representative, he did not have much to say except to place his bland but dutiful reliance on the orders of the authorities below. However, for the reasons set out above and in the absence of any comparative price and credit period figures on comparable product to support the case of the revenue, we uphold the grievance of the assessee and direct the Assessing Officer to delete this ALP adjustment. The assessee gets the relief accordingly. interest is includible in operating income and the operating income itself has been accepted as reasonable under the TNMM, there cannot be an occasion to make adjustment for notional interest on delayed realization of debtors. One can understand separate adjustment for excess credit period when the arm's length price for exports has been benchmarked on the CUP basis but not in a case when the arm's length price of the exports has been benchmarked on the basis of TNMM. The very conceptual foundation, for separate adjustment for delayed realization of debtors and on the facts of this case, is thus devoid of legally sustainable merits. We delete the ALP adjustment as made by the TPO towards the notional interest on receivables outstanding against sales made to AEs by the assessee. - Decided in favour of assessee.
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