2022 (11) TMI 198 - AT - Income Tax
Arm’s length price adjustment - purchase of greasy wool from its AE by the assessee from its associated enterprise by the assessee - Addition by following internal CUP method as the most appropriate method whereas according to TPO/AO the most appropriate method is TNMM method - HELD THAT:- We find that the assessee is engaged in the business of processing raw wool, greasy wool, polyester into wool tops, woolen fabrics etc. during the year - assessee entered into international transactions with its AE and both the international transactions involving import of raw material with AE as well as fabrics to the AE were bench marked by applying internal CUP method. Assessee has reliable data available with regard to the similar transactions with unrelated third parties and thus claimed CUP as the most appropriate method. We note that TPO has rejected the CUP method adopted by the assesse and instead applied external TNMM method after selecting 12 comparables and thus determined the transfer pricing adjustment to arrive at the ALP.
CIT(A) held that observations of the TPO’s that averaging of cost of purchases was not permissible under CUP method is in contradiction to the provision contained in Section 92C(2) read with Rule 10B(1)(a) of the Income Tax Rules, 1962 wherein it has been explicitly provided that where more than one uncontrolled transactions or prices are available then the ALP shall be the arithmetic mean of such prices.
We further note that the was having similar transactions with its AE and CUP bench marking analysis done by the assessee under identical facts has been accepted by the TPO in the orders framed u/s 92CA(3) of the Act by accepting the transactions with the AE to be at arms length price and no transfer pricing adjustment was made - we find considerable force in the assesse arguments that once the revenue has accepted accepted the method or proposition in the earlier years , then it is not open to the revenue to take a different in the subsequent years unless there is change in facts or in law. This is in consonance with the ratio raid down in the case of Radhaswami Satsang [1991 (11) TMI 2 - SUPREME COURT] - We are of the considered view that the Ld. CIT(A) has passed very reasoned and speaking order and accordingly we uphold the order of Ld. CIT(A)by dismissing the ground nos. 1 to 4 of the revenue.
Addition on account of marked to market loss - HELD THAT:- We find that loss claimed by the assessee of Rs. 24,06,174/- pertains to loss incurred upon restatement of loan in foreign currency at the year end which was attributable towards working capital. We note that the orders relied by the AO in respect of AYs 2001-02 to 2003-04 passed by his predecessor were reversed by the CIT(A) and loss pertaining to working capital was allowed.
CIT(A) has relied on the decision in the case of Woodward Governor Pvt. Ltd. [2009 (4) TMI 4 - SUPREME COURT] and ONGC [2010 (3) TMI 81 - SUPREME COURT] while allowing the appeal of the assessee. CIT(A), we do not find any infirmity in the order of Ld. CIT(A) and accordingly, the same is affirmed by dismissing the ground no. 5 of the revenue’s appeal.
Addition from bogus non-existent party - HELD THAT:- We find that the assessee has incurred these expenses under the head repair and maintenance for which the payments were made to M/s Prab Brothers & Co by account payee cheques. Likewise commission was paid to Rajesh Kapoor for soliciting sales - We note that in respect of both these parties all the necessary material/evidences such as bills vouchers and rate contract etc were placed before the AO as well as Ld. CIT(A) and the payments were made by cheques after proper deduction of TDS and similarly the commission was paid to Rajesh Kapoor with reference to sales effected by him and even invoices were placed on record in respect of which the commission paid to Rajesh Kapoor after deduction of TDS. Considering these facts, we are of the view that the Ld. CIT(A) has rightly allowed the appeal of the assessee. The ground no. 6 of the revenue is dismissed.