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2020 (8) TMI 509 - ITAT AHMEDABADTP Adjustment - whether the TPO is right in comparing the average price of the comparables with the individual invoices raised by the assessee to the associated enterprises for determining the ALP? - HELD THAT:- Provision of rule 10B(1)(a)(i) authorized to identify the comparable uncontrolled transaction or a number of such transactions. Provisions of the rule permits to aggregate the comparable uncontrolled transactions for determining the ALP. Rule does not permit to aggregate the international transactions carried out by the assessee to work out the average price for the purpose of the comparison. As relying on TILDA RICELAND PVT LTD [2014 (3) TMI 63 - ITAT DELHI] we are not impressed with the argument of the learned counsel for the assessee that the TPO erred in comparing the ALP of the comparable companies with the individual invoices raised by the assessee to the associated enterprise. Accordingly, we reject the same. ALP determination - whether the benefit of 5% variation is to be calculated with reference to the ALP determined from the comparable uncontrolled transactions or at the price at which the assessee exported the goods? - HELD THAT:- Company shall become the associate enterprise of another company if at any time during the relevant previous year such company meets the criteria specified under the provisions of section 92A of the Act. Admittedly, the Dyestar Group of companies became the AE of the assessee in the year under consideration i.e. 4th February 2010. Thus, to our understanding such company cannot be taken as comparable company for the purpose of determining the ALP under rule 10A of the Rules. What is left is the non-AE party transactions carried out by the assessee during the year under consideration for the purpose of determining the ALP which works out at ₹ 191.52 which is much more than the price charged by the assessee with the associated enterprise. It is not issue arising from the order of the authorities below and similarly neither the learned AR nor the learned DR brought to our notice at the time of hearing. No infirmity in the order of the authorities below for making such upward adjustment to the total income of the assessee. International transactions carried out by the assessee with Well Prospering Ltd, - whether the transactions carried out with the AE can be considered as one of the comparable for determining the ALP for the purpose of the comparison? - HELD THAT:- Admittedly, the Dyestar Group of companies became the AE in the year under consideration dated 4th of February 2010. The provisions of section 92A(2) clearly states that a company shall become AE of another company at any time during the year under consideration if it meets the criteria provided under section 92A of the Act. Once the comparable company becomes the AE of the assessee in the year under consideration, then such company cannot be considered for the purpose of comparable. We hold that the assessee has mistakenly considered one of its AE (Dyester Group) as the comparable in its transfer pricing study report for the transaction carried out with the Dyester Group only as discussed above, but the income tax authorities were duty-bound to rectify such mistake as discussed in the preceding paragraph. Coming on the merit of the case, if we exclude the Dystar Group as 1 of the comparable for determining the ALP, then the arm length price comes out at ₹ 115.5 and ₹ 122.66 for product namely ‘Reactive Red 195’ and ‘Reactive Black 5’ respectively whereas the price charged by the assessee from the AE ranges between ₹ 108.75 to 128.12 for product ‘Reactive Red 195’ and ₹ 110.06 to ₹ 115.22 for ‘Reactive Black 5’. We direct the AO/TPO to compare the ALP with the each invoice raised by the assessee and wherever he finds the difference exceeding 5% of the actual price, make necessary adjustments. Hence the ground of appeal of the assessee is partly allowed.
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