TMI Blog2012 (7) TMI 117X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the assessee with its AE, as also the non-AE transactions and then compute the adjustment of ALP - assessee stand partly allowed for statistical purposes. Whether 5% tolerance limit prescribed by the second proviso to Section 92V(2) would apply only in those cases where more than one comparable price has been adopted to arrive at the Arm's Length Price – Held that:- claim of the assessee for 5% of tolerance limit cannot be granted as no arithmetical mean as provided in the first proviso has been determined – Against assessee Levy of interest under sections 234A, 234B and 234C of the Act – Held that:- Levy of interest under sections 234A, 234B and 234C are consequential in nature, the same are dismissed - Appeal of the assessee is partly allowed for statistical purposes - IT APPEAL NO. 1789 (MDS.) OF 2011 - - - Dated:- 16-3-2012 - N.S. SAINI, GEORGE MATHAN, JJ. T. Banusekar for the Appellant. R.B. Naik for the Respondent. ORDER George Mathan, Judicial Member This appeal is filed by the assessee against the assessment order dated 27.09.2011 and also the order of the Dispute Resolution Panel (DRP) Chennai in F.No.DRP/Chennai/Sectt./016/2011-12 dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 234A, 234B and 234C of the Act. 12. For these grounds and such other grounds that may be urged before or during the hearing of the appeal it is most humbly prayed that the Hon'ble Tribunal may be pleased to ( a ) Allow the deduction u/s.10AA as claimed by the appellant. ( b ) Delete the adjustment made to the Arms length price made by the Transfer Pricing Officer. ( c ) Direct the Assessing Officer to give credit for self assessment tax paid by it. ( d ) Delete the levy of interest. ( e ) Pass such other orders as the Hon'ble Tribunal may deem fit." 3. Shri T. Banusekar, C.A., represented on behalf of the assessee and Shri R.B. Naik, Ld. C.I.T. D.R. represented on behalf of the Revenue. 4. At the time of hearing, it was submitted by the Ld. A.R. that ground No.10 of the assessee's appeal was not pressed as necessary relief had already been granted by the Assessing Officer. In the circumstances, the said ground No.10 of the assessee is dismissed. 5. In regard to Ground Nos. 2 to 4, it was submitted by the Ld. A.R. that the issue was against the action of the Assessing Officer in re-comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee and not the purchases, to which the DRP had held that the purchases and sales were two different transactions and there was no scope for such netting off. It was the submission that the DRP had also further rejected the objections of assessee in regard to the applicability of the proviso to Sec. 92C(2) by holding that the said proviso shall apply only if most appropriate method resulted in more than one price. It was further submission that the DRP had also held that similar adjustments had been made in respect of the sales to the AE during the earlier years and no objections had been raised by the assessee. It was the submission that during the earlier years, the adjustments did not lead to any substantial tax implications on the assessee and on the basis of advice give by the counsel for the earlier assessment years, appeals had not been filed and no reference was made. It was the submission that even when applying the CUP method, it was the net of the transaction that was liable to be considered. It was the submission that under the provisions of Sec.92C what was being determined was the ALP and to verify as to whether there was any variation in regard to the same a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to take into consideration all the transactions as a whole when computing the ALP. It was the submission that the profit is the net of the cost of sales less cost of purchase and other expenses. By ignoring the positive deviation on the purchase from the AE and considering only the negative deviation on the sale to AE, the transaction itself would not be complete for the purpose of computing the ALP. It was the submission that the order of the Assessing Officer on this issue may be reversed. It was the submission that the AO may also be directed to grant the assessee the benefit of 5% of tolerance limit prescribed by the second proviso to Sec. 92C(2) of the Act. In reply, Ld. DR vehemently supported the order of the Assessing Officer and the DRP. It was the submission that the transactions independently were liable to be considered. It was the submission that each transaction was a separate one and no netting could be granted. 8. We have considered the rival submissions. Perusal of the provisions of Sec.92C shows that the words used is "in relation to an international transaction ............ having regard to the nature of transaction or class of transaction or class of associa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee dealing with the AEs is a better position to negotiate better prices and consequently would be able to get a better bargain. Here, what is to be seen is whether the transaction of purchase and sale being the nature of transactions, when seen in consolidated from, generates profits which normally would be generated. For this both the purchase and sale transactions would have to be considered. To explain by an example, the assessee purchases a product at Rs. 10 from its AE. The same product is sold by a non-AE at Rs. 12/-. The assessee sells the finished product to its AE at Rs. 15/-. The same finished product is sold by a non-AE at Rs. 17/-. The profits from both transactions, assessee to AE, as also non-AE to non-AE would give Rs. 5/- But for the purpose of determining the ALP as the assessee purchases from its AE at a price lower than non-AE, the purchase price would be accepted as the deviation is negative i.e. Rs. 10/- is lower than Rs. 12/-, but as the assessee sells to its AE at a price lower than a non-AE, the sale price will be adjusted to the selling price of the non-AE as the deviation is positive i.e. Rs. 15/- is lower than Rs. 17/-. Therefore, Rs. 17/- will ..... X X X X Extracts X X X X X X X X Extracts X X X X
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