TMI Blog2011 (6) TMI 130X X X X Extracts X X X X X X X X Extracts X X X X ..... argin was compared, was not provided to the assessee company - On the other hand, the data of five companies which were engaged in the similar type of business, provided by the assessee to the A.O., was totally ignored for no cogent reason - therefore, of the considered opinion that the matter requires fresh adjudication by taking the average of net profit shown by the companies considered by the A.O. while making this upward adjustment and the companies on which assessee has placed reliance to show that transaction between the assessee company and its principal was at arm's length price - While doing so, similar figures of all the companies should be taken into consideration. In case, other income of the assessee is excluded form the net profit, the other income of comparable companies should also be excluded from their net profit. With these observations, the matter is restored back to the file of the A.O. for fresh adjudication after giving opportunity of being heard to the assessee. - 356 (AHD.) OF 2008 - - - Dated:- 17-6-2011 - D. K. TYAGI, A.K. GARODIA, JJ. J.P. Shah for the Appellant. S.A. Bohra for the Respondent. ORDER D.K. Tyagi, Judicial Member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incentive. He concluded that in these circumstances, net profit will become negative i.e. (-)3.21%. Invoking the provisions of section 92C(3), the A.O. issued a show cause notice. The A.O. pointed out that the profit of business ensuing to the assessee did not appear to be the coefficient of the turnover of the business of international transaction carried out by the assessee during the year with its associate enterprises. As the operating margin appears low, the A.O. proposed to make upward adjustment in the ALP by treating the instances of similarly placed companies and made upward adjustment after allowing the assessee reasonable opportunity to rebut the objection of the department. The A.O. stated that the assessee has not been able to prove in terms of documents that the transaction between the assessee company and its principal was at arm's length price. The details on the basis of which the revenue held that there was a case to disturbed the ALP had been culled out from prowess software which was a reliable data. 3. Before CIT(A), assessee company filed written submission which have been summarized by the Ld. CIT(A) as under: "The appellant has inter alia submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee with its associate concern by observing as under: "6. I have carefully considered the facts of the case, the arguments of the Assessing Officer and the arguments of the learned Authorized Representative. The Assessing Officer in this case has adopted the net margin method to make an up-ward adjustment in the price adopted for International transaction made by the appellant with its associated-concern. This adjustment made by the Assessing Officer is justified and according to Law for the following reasons: 6.1 The appellant is almost a 100% subsidiary of the foreign enterprise. The parent company holds 98% of the total number of shares of the appellant. Therefore, the principal company is in a vantage position to dictate or determine the sale price made by the appellant. Secondly, the parent company is the only buyer of the customized components sold by the appellant company. In such a situation it has to be seen whether the Indian enterprise is selling its products to foreign enterprise at arm length price. The Assessing Officer has correctly found that the appellant is not making any profit in its entire operation with the parent company. Once export incentiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the A.O. are not comparable with the assessee company as the size of the company, infrastructure, turnover and full data of the company was not provided to the assessee company to rebut the findings of the A.O. Most of the companies referred for comparison with the assessee company were not even dealing in the goods in which assessee company deals. Ld. counsel for the assessee further argued that Ld. CIT(A) was wrong in not considering the other income of the assessee company mainly consisting of export inventive for the purpose of calculating margin money with the other companies whose net profit is including other income also. To be fair to the assessee, the other income of those companies should also be excluded from the net profit of those companies while comparing with the results of the assessee company. Ld. Counsel for the assessee also argued that the authorities below also ignored the data submitted by the assessee before them for comparison purpose for calculating the net margin of the five similarly placed companies without giving any cogent reasons. It was also argued by the Ld. Counsel for the assessee that in the subsequent years i.e. assessment years 2005-06, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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