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TMI Blog2010 (7) TMI 520X X X X Extracts X X X X X X X X Extracts X X X X ..... ; The CIT(A) ought to have considered the very fact that the gross margin of the assessee is lower than the gross margin of the comparables which shows that the loss was due to undercharging of the exports made to A.E. The CIT(A) ought to have considered the fact that the freight charges debited by the assessee were neither linked to purchases or linked to sales. The assessee itself admits that there are no transactions after July, 2003 and that the assessee continues to incur freight & clearing charges. (iii) The CIT(A) erred in accepting the arguments of the assessee to give relief claimed by the assessee without giving an opportunity to the Department to verify the details submitted by the assessee before allowing the claim. (iv) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the TPO and made the following addition in computing the taxable income of the assessee: i. Addition of Rs.52,78,324 to the total income of the assessee on account of rejection of the arm's length nature of its international transaction price charged by 3M India. 3.2 The TPO had determined the ALP of revenue from Global Trading Segment at Rs. 2,24,28,710 and the adjustment of ALP at Rs.52,78,324. While determining the ALP, the TPO has considered 4 comparables under TNMM and the operating profit to operating cost is considered as the Profit Level Indicator (PLI). The TPO arrived at the mean PLI of the comparables at 7.59% on cost. The comparables selected by the assessee were not accepted by the TPO since accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3-04 vis-à-vis 0.46% of the total sales for the FY 2002-03. (3) High administration and other operating costs of Rs.34,16,681 for the FY 2003-04 when compared to Rs.70,53,281 for the FY 2002-03. (4) The CIT(A) also applied the CUP method based on the average price of Niger Seeds reported by the Commission for Agricultural Cost and Prices. (5) If the same proportion of freight and administration costs of the preceding FY 2002-03 (i.e. 0.46% on sales for freight expenses and 4.12% on sales for administration charges) are considered for the FY 2003-04, the operating margin of the taxpayer works out to 5.51% on the operating cost, which is more than the average operating margin of the comparables. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onse to the learned DR's argument that the CIT(A) erred in accepting the arguments of the company without giving an opportunity to the Department to verify the details submitted by the assessee, the learned AR of assessee stated that the Report of the Commission for Agricultural Costs and Prices and the News Article dated 23-1-2003 in the Financial Express and Press articles on crop failure during the years 2002 and 2003 are information/documents which was available in public domain and everyone has access to this. It was submitted that the Company had provided the source details i.e., website link along with the reports/documents and these documents were filed as part of the paper book in January, 2010 and a copy was provided to the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record. The Company was engaged in sale of Niger seeds, Granite/Sandstone, Mopeds/Kinetic, Safflower seed. The sale of Niger seeds constituted the major revenues for the Company. During the financial year ended March 31, 2004, the total export business of the global trading division was Rs.1.71 crore compared to Rs.17.09 crore during the previous year ended March 31, 2003. There was a 90% fall in the exports as compared to the previous year. The steep fall in the exports is attributed to significant reduction in exports of Niger seeds. 10.1 Report by the Commission for Agricultural Costs and Prices available in the public domain revealed that the area under the Niger seed crop in 1990-91 was 6.11 lakh hectares which declined to 4.25 lakh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 71,50,386 Commission 16,16,036 Other income 25,72,708 1 Total sales 17,09,53,821 2 Less: Cost of goods sold 16,09,82,923 1,54,68,835 3 Gross profit 99,70,898 16,81,551 4 Gross Profit/Sales (%) 5.8% 9.8% 5 Less: Operating expenses 6 Freight 7,82,716 19,59,790 7 Administration and other operating expenses, bad debts, compensation for cancellation of contracts & (Provision for doubtful advances due to suspension of purchases) 70,53,281 34,16,681 8 Net Profit/loss 21,34,901 (36,94,920) From the above analysis, it is clear that the operating gross profit margin earned from the Global Trading Division was better than last year and price charged for Niger See ..... X X X X Extracts X X X X X X X X Extracts X X X X
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