TMI Blog2012 (12) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... 961. The main addition made in the present appeal is transfer pricing adjustment of Rs. 2,68,77,839/- which has been agitated in the present appeal and the following grounds of appeal have been filed:- The following grounds of appeal are mutually exclusive of and without prejudice to each another, until otherwise stated therein: 1. On the facts and in the circumstances of the case and in law, the Hon'ble Dispute Resolution Panel (DRP) erred in confirming order under section 92CA(3) the Income Tax Act, 1961 ("the Act") passed by the learned Transfer Pricing Officer ("TPO") and thereby confirming the draft order passed by learned Assessing Officer ("AO"); 2. On the facts and in the circumstances of the case and in law, the Hon'ble DRP/TPO erred in rejecting two comparable companies, Gadage Mahalaxmi and Handicrafts Handloom, based on incorrect facts. 3. Without prejudice to the above ground, on the facts and in the circumstances of the case and in law, the Hon'ble DRP/TPO erred in not placing higher reliance on functional comparability vis-a-vis product comparability of the comparable companies while applying TNMM as the most appropriate method. 4. Without prejudice t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dertaken by the assessee during the year is sale of handicrafts items amounting to Rs. 34,85,15,948/-. For manufacturing segment the assessee benchmarked sales and adopted Transactional Net Margin Method (TNMM) on the basis of nine comparable companies with average arithmetical mean of 3.02%. The operating margin of the assessee is 0.87% and, thus, the transaction of the assessee was considered to be at arm s length. 3. In the trading segment, the transfer pricing analysis of the assessee has been accepted and no adverse inference has been drawn. 4. The TPO rejected eight out of nine comparables selected by the assessee on account of product comparability based upon which an adjustment of Rs. 2,68,77,839/- has been made. The nine companies which were selected as comparables by the assessee in its TP report are as under:- S.No. Name of the company Margins 1. Asian Electronics 18.66 2. Gratex Industries 8.26 3. Greenply Industries 8.82 4. Century Laminates 7.98 5. Gadage Mahalaxmi 14.29 6. Handicrafts Handloom (-) 0.09 7. Merino Panel 7.13 8. Pratik Panels 0.20 9. Southern Veneers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be correct. The broader industry of the comparable company and the assessee company is different. I therefore accept the objections raised by the assessee against this company which was selected by the assessee as a comparable. The company is dropped from the list of comparables. 6. The Gratex Industries being the only remaining comparable has been selected as comparable whose OP/TC is 8.26% and after giving the credit to the margin earned by the assessee the difference in the ALP has been found at 6.81% and differential amount has been computed at Rs. 2,68,77,839/-. The calculation is as under:- Operating Cost 364,272,706 OP/TC 8.26% Margin 30,088,925 Arm s Length Price 394,361,631 Price Charged by the assessee 367,483,792 Difference 26,877,839 % of difference with ALP 6.81% 7. At the outset, referring to the principle of consistency and the decision of co-ordinate Bench of Pune ITAT in the case of Brintons Carpets Asia P. Ltd. vs. DCIT (2011) 46 SOT 289 (Pune), it is the case of the learned AR that in subsequent year the Transfer Pricing Officer has identified new set of comparables and found transactions to be at arm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the file of Assessing Officer. 10. The learned DR was required to submit that whether on these facts and on these submissions of the assessee the matter can be restored back to the file of the Assessing Officer with a direction to redetermine the arm s length price of the assessee in respect of the aforementioned international transaction. The learned DR stated that he has no objection if the matter is restored back to the file of Assessing Officer for re-determination of the arm s length price. 11. After hearing both the parties on this issue and taking into consideration the peculiar facts of the present case that in subsequent years the department has relied upon fresh set of comparables and also keeping in view the fact that ld. CIT, DR has no objection to remitting the matter back, following the rule of consistency as described in the aforementioned decision of Pune Bench in the case of Brintons Carpets Asia P. Ltd. (supra), we restore the issue raised by the assessee in the present appeal to the file of Assessing Officer for redetermination of the arm s length price of the subject international transaction. It will also be relevant to reproduce the observations of Pune B ..... X X X X Extracts X X X X X X X X Extracts X X X X
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