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2014 (12) TMI 1 - ITAT PUNETransfer pricing adjustment – Rejection of analysis undertaken to determine ALP - International transaction of export of spare, parts and components with the AE – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that while carrying out the transfer pricing study of an international transaction, it is imperative that a comparison is made with the similarly placed transactions, as far as possible - the assessee benchmarked its International transaction of export of spares and components to its AE on the basis of TNM Method by relying on external comparable companies - the net profit margin in any particular kind of activity is indeed effected by various factors which are industry-specific and can also be unit-specific having regard to the degree of business experience enjoyed by an entity - while undertaking transfer pricing analysis one must examine the transactions undertaken with regard to the relevant factors effecting such transactions vis-à-vis transactions sought to be compared - with regard to the transactions of category ‘B’ and ‘C’, which is in the realm of sourcing of components, quite clearly the same is in the nature of industrial supplies, which are in-turn, used by the buyer in manufacturing of vehicles and the services being rendered by assessee is merely logistic service equivalent. The assessee which manufactures vehicles and sells the same, also undertakes supply of spares and components required for servicing of such vehicles sold by it - the supplies so undertaken are from already firmed-up sources, inasmuch as the assessee is the manufacturer of vehicles in which such components are used, and at the time of procurement for manufacturing the assessee has mandated the dies, design, quality, warranties, etc. - supply of spare-parts and components as purely after-sales distribution results in higher margins - the sourcing of products for overseas AE entailing category ‘B’ and ‘C’ transactions, the assessee has very limited role to play, which is akin to logistics support service provider - even according to the internal TNMM mechanism sought to be applied, the comparison of margin of transactions of category ‘B’ and ‘C’ undertaken with the AEs is incomparable with the transactions undertaken with the third parties (i.e. non-AEs) which are purely in the nature of category ‘A’. In relation to the international transactions of export to the associated enterprises relating to the spares and components required in servicing of vehicle manufactured and sold by the assessee, even on an application of internal TNM mechanism the international transactions undertaken with associated enterprises was at an arm's length price - the adjustment computed by the TPO with regard to the export to associated enterprises of spares and components required for the purpose of servicing of vehicles sold by assessee is untenable, as the transactions undertaken with third-party distributors are comparable to the transaction with the associated enterprises – thus, the matter is to be remitted back to the AO for re-determination of ALP of international transactions of export of spares and components – Decided in favour of assessee. Claim of additional depreciation on computers installed in factory u/s 32(1)(ii)(a) – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the field and has not been altered by any higher authority – the assessee’s claim of additional depreciation on computers installed in its factory is allowed – thus, the order of the CIT(A) is set aside – Decided in favour of assessee.
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