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2011 (12) TMI 393 - AT - Income TaxTransfer pricing adjustments - Reference to TPO - whether the TPO was justified in proceeding with the exercise of determining the ALP distinctly in respect of trading and indenting activities? - held that:- trading and indenting activities are quite distinct from each other and hence, benchmarking is also required to be done separately. - the TPO was justified in venturing to determine the ALP in respect of both these activities distinctly. Bifurcation of employee cost between trading and indenting segments. - held that:- TPO has rightly worked out the assessee's profit rate from the international transactions in the indenting segment at 0.04% of the turnover. If we consider the ratio of gross commission to the indenting turnover, the same comes to around 1.5%. Regarding comparability - held that:- the list of comparable cases initially given by the assessee was meaningless for benchmarking the transactions in the indenting business. Despite the TPO's request, the assessee failed to furnish the names of any comparable cases. The TPO did not find any data of uncontrolled transactions in this activity because of its peculiar nature. It was only thereafter, that he proceeded with the three cases - the TPO, in the absence of having been pointed out any comparable uncontrolled case by the assessee or himself finding any such case, was right on the question of picking up the cases having controlled transactions for determining the ALP of the assessee's international transactions. - the TPO was justified in considering these three cases as comparable for benchmarking the profits from the assessee's indenting activity. TDS - disallowance u/s 40(a)(ia) - The contention that there was no profit element in such reimbursement of expenses was also raised before the AO, which remained uncontroverted - Once the element of income is missing, naturally, there cannot be any question of deducting tax at source from such payment made, which pre-supposes the taxability of such sum in the hands of paye. Adjustment in the value of the opening stock to the assessee u/s 145A - held that:- The right course is to allow the benefit of increase in the value of opening stock of the current year only when the issue of addition to the value of the closing stock of last year attains finality and that too, to the extent the addition is upheld. - AO directed to give consequential relief.
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