TMI Blog2011 (10) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... export incentives which form part of the net realization on account of exports nor for the expenses, such as discounts and domestic sales promotion expenses, which are incurred solely for the purposes of domestic sales. - The price charged in intra AE transactions is clearly more than price charged in independent transactions. All the three ALP adjustments sustained by the CIT(A), for this reason also - as well as bearing in mind entirety of the case, are not legally correct. - Decided in favor of assessee. - ITA NO. 5152 (MUM.) OF 2009 - - - Dated:- 21-10-2011 - PRAMOD KUMAR, AND SMT. ASHA VIJAYARAGHVAN, JJ. Appearance: Prakash Jotwani for the Appellant. C.G.K. Nair for the Respondent. ORDER Pramod Kumar, Accounta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, under the CUP method- which assessee was stated to be following, it was submitted by the assessee that the price charged for a small order of 1,100 meters of fabric could not be compared with the price charged for order of 33,505 meters. It was also submitted that the price variance is due to size of the order and the market territory. The Transfer Pricing Officer then pointed out as to why the rate of Rs 72 per meter, on which he has sold the same fabric in the domestic market, not be adopted as an arm's length price, it was submitted by the assessee that the adjustments are required to be made in this price for export incentives as also for discounts, sales promotion, advertisement expenses, brokerage, sales commission. It was contende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty in Mexico for a price of US$ 1.4791 per meter. The assessee's contention to the effect that (i) the sale to AE was on 150 days DA basis, which had higher credit period, and that (ii) the Mexico and Panama were altogether different market, were rejected by observing that the contentions are "not explained fully and also the effect of such differences in sales terms, if any, is also not worked out" and "due to this (above stated reasons) no adjustment is considered necessary to the price of uncontrolled transaction, for comparing the same with the controlled transaction." As regards the sale of fabric design # 55023, even as the Transfer Pricing Officer accepted the sale of the same to Dubai based AEs @ US $ 1.6697 by noting that the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t". On the basis of this reasoning, learned CIT(A) concluded that "the special provisions relating to avoidance of tax is applicable so far as it applies to sales to AE at Panama" and that "the AO was just in making adjustment on the price in dealing with Panama". Accordingly, he confirmed the ALP adjustment only to the extent the same was made for exports to assessee's AE in Panama. The assessee is aggrieved and is in appeal before us. 3. We have heard the rival contentions, perused the material on record and duly considered factual matrix of the case as also the applicable legal position. 4. We are unable to see any merits in the approach adopted by the learned CIT(A) by singling out assessee's transactions with Panama based AEs and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that, according to the assessee, once these factors are duly accounted for, the AE prices will be less than prices in transactions with uncontrolled enterprises , and that aspect has not been disputed by the authorities below. We have also noted that the Transfer Pricing Officer has accepted that the assessee has sold fabric design # 55023 to an independent enterprise in UAE @ US $ 1.67 per meter, and yet sales to Panama based AE, which is surely a much smaller and newer market for the assessee, @ US $ 1.62 per meter (which is less than 3% variation in price) has been rejected at not an arm's length price. This action is also therefore unsustainable in law. As regards exports of design # 50001 at US $ 2.06 per meter, we have noted, as obs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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