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TMI Blog2012 (8) TMI 330X X X X Extracts X X X X X X X X Extracts X X X X ..... siness income' instead of 'income from other sources'. 3. As stated by the A.O. in the assessment order passed u/s.143(3), the assessee had received interest of Rs.1,38,689/- on the income-tax refund during the year under consideration and the same was taken as business income for the purpose of computing deduction u/s.80HHC. The A.O. treated the said interest income as income from other sources and computed the deduction u/s.80HHC accordingly. On appeal, the Ld. CIT (A) accepted the treatment given by the assessee to the interest income as business income observing that the same was received by the assessee on bank deposits. 4. We have heard the arguments of both the sides on this issue and perused the relevant material on record. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Transfer Pricing Officer (TPO) u/s.92CA(1) of the Act for determination of the Arm's Length Price (ALP). The assessee firm had purchased rough diamonds worth Rs.96,33,26,254/- with a mark-up of only 0.75% to the Associated Enterprise (AE) and keeping in view this low mark-up to the AE on rough diamonds sold to the assessee, the relevant transactions were accepted by the TPO as Arm's Length. As regards the transactions with PEs involving sale of cut and polished diamonds worth Rs.25,86,92,850/- and sale of rough diamonds worth Rs.9,08,435/-, the assessee had adopted TNMM Method for comparative analysis. The total turnover of the assessee was Rs.120 crores of which export turnover was Rs.104 crores and the PBT to net sales was 3.35%. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge OP / cost ratio to be applied to determine the ALP. The operating profit to cost ratio shown in the said three cases was 29.44%, 11.53% and 10.05% as against a similar ratio in the range of 5 to 6% shown in the remaining 30 cases. The Ld. CIT (A) found merit in this submission of the assessee. He also found that in the case of Vishindas Holaram, whose OP / cost margin was 29.44%, they were DTC site holders having assured supplies of rough diamonds. He also found that in the case of Venus Jewels, whose OP / cost margin was 11.53%, they were solitaire diamonds specialists and were supplying 'fancy special diamonds'. Similarly, Ramkrishna Exports, whose operating OP / cost margin was 10.05%, was found to be dealing in pointers (large stone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngly included by the TPO in the operating cost of assessee's sales for the year under consideration. The assessee, therefore, moved an application u/s.154 seeking rectification of the said mistake and the TPO vide an order dated 28.03.2007 passed u/s.154, accepted that the exchange difference loss was required to be accounted for under the head 'non-operating expenses' and TP adjustment to that extent was required to be reduced. As a result of the said rectification order passed by the TPO, the operating cost of sales of the assessee would be reduced to Rs.118,31,73,044/- and as shown in the working prepared by the Ld. Counsel for the assessee, the ALP of sales of the assessee applying even the OP / cost margin as worked out by the TPO at 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee and the Ld. CIT (A), in our opinion, was fully justified in excluding the same for the purpose of comparative study and deleting the addition made by the A.O. on account of TP adjustment after having found that the difference between the ALP worked out by excluding the said three cases from comparables and the sales price charged by the assessee to its AE was within the safe harbor limit of 5%. We, therefore, find no infirmity in the impugned order of the Ld. CIT (A) deleting the addition made by the A.O. on account of TP adjustment and upholding the same, we dismiss ground no.2 of the revenue's appeal. 10. Although the assessee in its Cross Objection has raised various issues relating to transfer pricing adjustments made by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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