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2015 (7) TMI 1 - AT - Income TaxAddition made to the value of international transactions entered into by the assessee with its associated enterprises in respect of export of finished goods and import of goods - Held that:- The transactions of exports of goods, import of goods are all part of the assessee's business. Further, the commission is paid to various parties to boost the sales of the assessee's products. Therefore, the transactions of exports, imports and payment of commission to agents are closely inter related and are part of single business activity of the assessee and the profit earned by the assessee is collective result of all these transactions and hence, it is impractical to analyse the profits of each individual transactions. Accordingly, the assessee has rightly aggregated the above transactions for the purposes of determining the ALP under TNMM. Even if the various transactions are evaluated independently, the net final result remains the same. The assessee has adopted TNMM for determining the ALP for the various transactions and the assessee had contended that its net operating margin is much higher than the comparable companies. This fact has not been disputed by the learned TPO since he himself has accepted that more than 95% of the exports and imports are at ALP as per the TNMM method. Accordingly, even if the various international transactions are evaluated separately, the final result remains the same. The assessee has adopted TNMM wherein the net operating margin of the assessee is compared with the net operating margin of the comparables. Once the net margin of the assessee is higher, it means that all the international transactions entered into by the assessee with its AEs are at ALP. With regard to extent of the pricing of the product depends upon various factors like the geographical location of the vendor, the volume of the order, timing of the order, urgency of requirement, competition in the market, etc. In this regard, reliance was placed on the detailed arguments as taken with regard to adjustment for export as discussed above in paras 3 & 4 of this order. According to him, the pricing depends upon so many factors and suitable adjustments cannot be made to account for such differences. As discussed above in respect of the same party and the same product, the assessee has paid different prices which itself indicates that the pricing is dependent upon various factors for which suitable adjustments could not be made. In this context, refer page 199 of the Paper Book wherein it is evident that the assessee company has paid different prices to Amphenol Aerospace Operations, USA for the same product. Accordingly, in view of the various differences enumerated above. The CUP method is not the most appropriate method in the case of the assessee since suitable adjustments are not possible to be made in respect of the above differences. So, the addition on this account is not justified. No adjustment is to be made for determining the arm's length price in respect of international transactions undertaken by the assessee for the year under consideration.
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