9911796707
TMI Blog2012 (4) TMI 356X X X X Extracts X X X X X X X X Extracts X X X X ..... n in respect of arm's length price (ALP) of these transactions. Consequently, the AO referred the matter to the Transfer Pricing Officer (TPO) for determining the ALP of the transactions. 1.1 The TPO passed the order on 16.10.2008, in which upward revision of Rs. 2,95,42,104/- was suggested for bringing the value of the transactions in line with the ALP. It is mentioned that Sri Chirage Private Ltd. is undisputedly an AE. The assessee has not submitted statutory form and it has also not maintained the requisite documentation to justify that the transactions were undertaken at arm's length. The form has not been filed even in the course of determination of the ALP. He came to the conclusion that CUP is the most appropriate method to evaluate the ALP. The assessee also agreed that CUP method is the most appropriate method. For this purpose, it was found that the AE had sold similar goods to 3-AAY, Ganpati Rollings, Abhishek and Jain Metal Works in India. The TPO tabulated the price charged from the assessee and from the unrelated parties in the period 22.12.2004 to 16.03.2005. It was found that while copper-ingots were sold to the assessee @ US$ 3600 per metric ton (PMT), and they w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be given on account of immediate payment by unrelated parties, it is mentioned that there will be difference in price in the case of cash sale and credit sale. He granted reduction of 0.35% on this ground. 1.7 The ld. CIT (Appeals) also noted that as per quotations of copper on London Metal Exchange (LME), the rate increased from US$ 3022 in January to US$ 3110 in February, and to US$ 3245 in March. In view thereof, he accepted the plea that the assessee had to pay higher price because of increase in international market. He worked out the deduction in this respect at 7.40%. 1.8 Accordingly, it has been decided that adjustment of 7.75% should be given to the assessee to determine the ALP. He quantified the relief at Rs. 22,89,513/-, which means that the addition of Rs. 2,72,52,591/- was confirmed. 1.9 Both the parties are aggrieved by this order. The assessee has taken up seven grounds in the appeal. In the course of hearing before us, it has been explained by the ld. counsel for the assessee that only ground no. 1 is the effective ground which is that the ld. CIT (Appeals) erred on facts and in law in confirming the addition of Rs. 2,72,52,591/- on account of the alleged differ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... increased to 3150 on 31.12.2004. In the months of January and February, the closing rates varied between 2912 and 3242. It closed at 3290 on 31.03.2005. On the basis of this data, it is mentioned that the rate started increasing from the middle of November, 2004. In view of the fluctuating rate, it was submitted before the ld. CIT (Appeals) that adjustment should be made from the rate charged by AE from the assessee as the transactions with unrelated parties were fixed-price contracts. The ld. CIT (Appeals) accepted this contention and granted reduction @ 7.40%. While doing so, he has taken into account the prevailing rates in the months of January, February and March, 2005. If he had taken the date of contracts of the AE with unrelated parties into account, which is 10.10.2004, the reduction of 12.03% should have been allowed by him. 2.2 He further submits that the ld. CIT(A) granted reduction of 0.35% on account of the fact that contracts with unrelated parties were spot payment contracts by opening LC. However, he ought to have given further deduction in respect of credit facility of two months granted by the AE to the assessee. 2.3 It is also submitted that all these deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een wrongly made if we examine the price quoted on LME, which never exceeded 3290. He further granted adjustment of 0.35% on account of the fact that unrelated parties made payments through LC, which involves cost. The AO was not heard on this point also. This deduction has also been wrongly granted. It is his case that the determination of the price at US$ 3200 PMT has been made on the basis of data furnished by the assessee in a scenario where no documentation was maintained and even form 3CEB was not filed at any time. It has not been filed even during the course of hearing of the case by the Tribunal. Therefore, it is argued that the order of the ld. CIT (Appeals) is not sustainable in law as it suffers not only from violation of principle of natural justice but also because undue adjustments have been made while determining the ALP. Consequently, it is urged that the order of the CIT (Appeals) may be set aside and that of the AO may be restored. 4. In the rejoinder, the ld. counsel submits that non-maintenance of contemporary data and non-filing of form no. 3CEB have no bearing on determination of ALP although these failures have their own consequences. The CUP method has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It appears from the conduct of the parties that the contracts were valid till the end of the last quarter of financial year 2004-05, as sales to them at the fixed rate have been made in January and February, 2005. There are no prior sales to these parties. The assessee did not receive any advance from the unrelated buyers as payments are stated to have been received through LCs on shipment of goods. It may be mentioned here that the assessee raised two invoices on Ganapati Rollings (P) Ltd. on 22.01.2005 and 07.02.2005, and it raised only one invoice on Abhishake Electricals on 20.01.2005. From these facts, it can be concluded that both the unrelated buyers were not obliged to purchase copper-ingots from the AE on or about 10.10.2004. In this connection, it is also of interest to note that the closing rate on LME on 11.10.2004 was 3140 and on 12.10.2004 it was 3094. The quotation on 10.10.2004 is not available. Further, the closing rates at LME on 20.01.2005 was 3040, on 21.01.2005 it was 3082, and on 07.02.2005 it was 3000. The quotation of 21.01.2005 is not available. Thus, it can be safely inferred that the LME rate on all these dates was lower than the rate at which goods on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any deduction in respect of the difference in payment terms granted to the assessee and the unrelated parties. The unrelated parties were bound to pay the purchase consideration immediately on shipment of goods. It is the claim of the assessee that it has been granted a credit of two months after shipment of goods. This issue has not been discussed by any of the lower authorities. It is an accepted position that difference in terms of payment do have an impact on the price. The ld. counsel has submitted that the assessee is entitled to deduction of 1.75% on this count. While the submission of the ld. counsel is accepted in principle, it is not feasible for us to work out the deduction to be granted on this ground. Therefore, the matter is restored to the file of the AO to grant appropriate deduction after considering the relevant data about terms of payment actually granted to unrelated parties and the assessee. Thus, this matter is restored to the file of the AO to be decided afresh after giving the assessee a reasonable opportunity of being heard. 5.5 It has also been submitted that the ld. CIT (Appeals) granted deduction from the adjustment made to the total income. It is argu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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