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2018 (5) TMI 1374 - AT - Income TaxTransfer pricing adjustment - transaction of import of raw materials - Held that:- We find merit in the plea of assessee in this regard that the DRP should have admitted the additional evidence, consider the same and then decide the issue. The DRP having failed to do so, the action of DRP in this regard is not justified in view of the provisions of the Act. Accordingly, we remit this issue back to the file of DRP, who shall admit, consider and adjudicate the additional evidence and decide the issue, in accordance with law. It may be pointed out herein itself that further plea of assessee in this regard was that no adjustment on this count was made in any of the earlier years. The said submission of assessee needs verification and in case an approach has been adopted from year to year, the same may not be disturbed unless and until there is change in facts and circumstances. Reasonable opportunity of hearing shall be provided to the assessee by DRP in this regard. Further, the assessee is directed to comply with the notices issued and submit information and clarification before the DRP for adjudicating the issue. The issue raised vide grounds of appeal No.2 and 3 is allowed for statistical purposes. Transaction of import of finished goods - Held that:- Re-sale Price Method is the most appropriate method to be applied in such circumstances since the assessee is purchasing finishing goods from its associated enterprise at a price, which in turn, re-sells to the unrelated enterprises. The Assessing Officer / TPO is thus, directed to apply RPM method and determine the margins of assessee and of the comparables. The assessee has filed the working of assessee’s margins and the margins of comparables which may be verified and in case the same is within +/- 5% range, no transfer pricing adjustment needs to be made in the hands of assessee. Reasonable opportunity of hearing shall be given to the assessee. The ground of appeal No.4 is allowed as indicated above. Transfer pricing adjustment made in respect of transaction of export of packing materials - transaction of export of spools to associated enterprise - Held that:- The assessee had exported packing material in the shape of spool to its associated enterprise, on which tyre cord or the hose wire was wound to send the same to the customers. The assessee charged associated enterprise actual cost of calculation of spools with margin of 10%. The TPO was of the view that indirect cost also needs to be considered for undertaking transaction of export of spools to associated enterprise. Transfer pricing adjustment made in respect of transaction of export of packing materials - Held that:- We reverse the order of Assessing Officer/TPO/DRP and hold that no adjustment has to be made in the transaction of export of packing material to the associated enterprise, wherein the assessee had charged cost of calculation of spools with markup of 10% i.e. on account of direct cost to its associated enterprise, such a transaction is at arm's length and no adjustment in this regard needs to be made. Hence, the ground of appeal No.5 is allowed.
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