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2015 (5) TMI 644 - AT - Income TaxTransfer pricing adjustment - most appropriate method - Held that:- Pertinently, bifurcation of assessee's financial results into manufacturing and trading segment was done only in the course of proceedings before the TPO and so far as the segment of Trading activity is concerned the TPO accepted the position that it was at arm's length price and no addition has been proposed. The addition in question has been made only with regard to the Manufacturing segment. DRP/AO determining the arm's length price of the international transactions pertaining to the manufacturing segment of the appellant, by comparing with external comparables when functionally similar internal comparables are available to determine the arm's length price under the internal Transactional Net Margin Method which is more reliable - Held that:- The present case internal comparison of the operating margins using internal TNM Method is liable to be upheld in order to compute arm's length for the international transactions of purchase of raw material and components from associated enterprises as well as sales of finished goods effected to the associated enterprises. On the basis of the aforesaid benchmarking, the profitability of international transactions under the associated enterprises segment computed at 3.25% is higher than the profitability of transactions under the Third parties segment computed at 2.80%. Hence, the international transactions entered with the associated enterprises under the Manufacturing segment on account of purchase of raw material and components and also sales are consistent with the arm's length price and no transfer pricing adjustment is thus required to be made. - Decided in favour of assessee. Disallowing the expenditure incurred on lease rentals for use of Vehicles and Computers - Held that:- The dispute for the assessment year 2003-04 as relied to make disallowance was still not final and therefore the matter may be set-aside to the file of the Assessing Officer with the directions to decide the issue in the light of the ultimate decision with regard to such dispute in the assessment year 2003-04. The learned Departmental Representative appearing for the Revenue has not contested the aforesaid factual matrix and has also not opposed the plea of the assessee for remanding the issue back to the file of the Assessing Officer - restore the matter back to the file of the Assessing Officer who shall consider the claim of the assessee in conformity with the ultimate decision on this aspect in the assessment year 2003-04. - Decided in favour of assessee for statistical purposes.
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