TMI Blog2013 (6) TMI 184X X X X Extracts X X X X X X X X Extracts X X X X ..... increased, the sale price of exported goods remained on the lower side which is an important element to materially affect the price in the open market. In this situation, we are inclined to hold that the authorities below should have considered the said difference due to foreign exchange rate fluctuation in favour of Thai Bhat and against the INR and the said difference has to be removed and the margin thereon has to be adjusted for arriving at the credible comparable through the requisite adjustments. AO restricted the depreciation on computer peripherals at 15% as against 60% claimed by the appellant – Held that:- The issue of depreciation of computer peripherals has been settled by Hon’ble Jurisdictional High Court of Delhi in the case of CIT vs BSES Rajdhani Bench Ltd. [2010 (8) TMI 58 - DELHI HIGH COURT] and accordingly allowed in favour of the assessee. Levying of interest u/s 234B and 234C of the Act – Short payment of advance tax - Held that:- In the judgment of Jurisdictional High Court of Delhi in the case of DIT vs Jacabs Civil Incorporated/Mitsubishi Corpn. [2010 (8) TMI 37 - DELHI HIGH COURT], the order of ITAT Delhi Bench in favour of the assessee and dismissing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stent losses and declining revenue without appreciating that the selection or rejection should be based on FAR analysis and not on financial results. 2.5 That the assessing officer/DRP erred on facts and in law in rejecting Orbit Industries Ltd. holding that the company is incurring losses ignoring the fact that the company has been selected after the functional, risk and assets analysis of the appellant. 2.6 That the assessing officer/DRP erred on facts and in law in appreciating that for the application of TNMM, the various differences on account of comparability are balanced out by selecting a larger set of comparables providing similar services at different ends of the industry spectrum. 2.7 That the assessing officer/DRP erred on facts and in law in not appreciating that the appellant has incurred losses because of sudden huge fluctuation in the exchange rate of INR against Thai Bhatt. 2.8 That the assessing officer/DRP erred on facts and in law in not appreciating that in the absence of such abnormal exchange rate fluctuation, the appellant would have earned 10.04 percent of profit over sales, and hence, no adjustment would have been warranted in the arms length price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee's arguments, the TPO has passed the order u/s 92CA(3). ii) The assessee has only repeated the submissions made before the TPO. iii) No comparables were given by the assessee company either before the TPO or before the undersigned during the course of assessment proceedings. iv) The assessee can not place any new arguments before the AO as it had ample opportunities to do so before the TPO. v) The order of TPO is detailed dealing with each aspect for the determination of correct arms length price for the international transactions undertaken by the assessee. 4. That the observations made hereinabove were contested by the assessee and said addition was challenged by the assessee company before DRP-I. DRP-I vide its order dated 09.09.2011 directed the TPO to recompute the ALP as per law by including Spectra Industries as a comparable and accordingly, the ALP calculation was restricted to Rs.4,30,47,427 and the remaining part of the order remained the same. 5. Accordingly, an addition of Rs.4,30,47,427 was made in the income of the assessee being the difference between the ALP. The Assessing Officer also made additions of Rs.39,000 on account of fees paid to ROC wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce was available in the public domain at the time of proceedings before TPO/DRP and Assessing Officer. The DR further submitted that as per relevant Rule 29, additional evidence cannot be entertained and admitted if during the earlier proceedings before the authorities below, the assessee has given appropriate and reasonable opportunity to submit the same. The DR also submitted that there is justified or reasonable ground in the application which prevented the assessee to file related evidence before the authorities below, therefore, additional evidence cannot be admitted. 9. We have carefully considered the rival submissions of both the parties pertaining to the application of the assessee for admission of additional evidence in hand. Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963 is reproduced as under:- 29. Production of additional evidence before the Tribunal.- The parties to the appeal shall not be entitled to produce additional evidence either oral or documentary before the Tribunal, but if the Tribunal requires any documents to be produced or any witness to be examined or any affidavit to be filed to enable it to pass orders or for any other substantial cau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness of trading of a variety of products, such as steel products, dies, components of automobiles, motorcycles, scooters and other automotive components, and equipments, etc. He further submitted that during the year under consideration for the purpose of business of trading of goods in India, the assessee company entered into international transactions with associated enterprises mainly pertaining to export of parts and dies, receipt of commission on imports and export equipments, import of parts and other capital goods. 14. The counsel for the assessee submitted that the Assessing Officer/DRP erred on factual matrix and legal position in aggregating the transaction of import of parts and capital goods with other transactions and benchmarking of international transactions at entity level by applying Transactional Net Margin Method (TNMM) and in rejecting the Resale Price Method applied by the appellant for benchmarking international transaction of export of parts as the most appropriate method and by applying TNMM method at entity level. He further submitted that the Assessing Officer as well as DRP also erred in rejecting associated enterprise of the appellant as the tested par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act on justified grounds after careful consideration of the submissions made before him (TPO). The DR further submitted that the assessee company did not submit comparables either before the TPO or before the Assessing Officer during the course of assessment proceedings and the assessee could not place any new argument before the Assessing Officer as it had ample opportunities to do so before the TPO. The DR supported the orders of the authorities below and submitted that the order of the TPO is detailed, dealing with each aspect and submission of the assessee for determination of correct ALP for the international transactions undertaken by the assessee with associated enterprises. 17. After careful consideration and perusal of the entire record placed before us, at the outset, we observe that the assessee has placed his reliance on the decision of ITAT Mumbai Bench in the case of UCB India (P) Ltd. vs ACIT 30 SOT 95 (Mumbai) wherein it is clarified that under the transfer pricing regulations, only margin of transaction is the basis of comparison. It has been held by the Tribunal that the benchmarking analysis is to be undertaken on transaction to transaction basis by comparin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eady entered into at a fixed price from the customers. This resulted in a loss to the appellant in the relevant previous year. It would be appreciated that the average of exchange rate of Thai Bhat during the six months period, i.e., October 2005 to March 2006 was 100 Thai Bhat = INR 110. Considering the said average exchange rate, the price of sale was agreed upon with the customer. However, at the time of purchases, the exchange rate of Thai Dhat increased, i.e., during April 2006 to September, 2006, the exchange rate of Thai Bhat increased to INR 119 = 100 Thai Bhat. Hence, because of the above, while the prices of purchases / import made by the appellant have increased, the sale prices have remained lower. It is also reiterated that the appellant while determining its selling price, was m anticipation that the average exchange price of Thai Bhatt will reduce more and would yield more profits to him, as the political and economic condition of Thailand was worse at that time. However, subsequent to entering into the contract for sale of imported goods at a pre-fixed price, due to sudden reform in the political and economic condition of Thailand, the currency went up and bec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd held that the assessee has not given any cogent reason for change in the new search process which was essential to have current year data and the filters applied earlier need to be applied now to maintain consistency in approach. The DRP further held that abnormal losses indicate that it was not a normal loss because financial analysis was triggered for FAR and this comparable fails at the very first step. In view of cogent reasons recorded by the TPO and DRP, we are unable to see any infirmity and perversity in these findings in rejection of Orbit Industry as a comparable. On the issue of adjustment of exchange fluctuation, loss incurred by the assessee, we observe that it is a well accepted principle of Transfer Pricing regulations to compare like with like and eliminate the differences if any, by suitable adjustment. The said principle clearly provides for adjustments in margins of the enterprise entering into international transactions for any differences between such international transactions and the transaction of comparables or between the enterprise entering into internationals transactions and comparable companies. The foreign exchange element also needs consideration. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated. The revenue authorities and TPO are duty bound to know that the TNMM visualizes the undertaking of a thorough comparability analysis and elimination of the differences through the requisite adjustments. 22. In the case in hand, admittedly, the average exchange rate of Thai Bhat during October, 2005 to March 2006 was 100 Thai Bhat equivalent to INR 110 and after consideration of said average exchange rate, price of sale of goods had to be agreed upon with the customers. The DR has not disputed the point that during April 2006 to September 2006 at the time of purchase, the exchange rate of Thai Bhat was substantially increased and the average exchange rate of Thai Bhatt was increased to 100 Thai Bhat = INR 119. Accordingly, we can not rule out and ignore this factual matrix emerged from the fluctuation of foreign exchange rates that while prices of purchases and import made by the appellant have increased, the sale price of exported goods remained on the lower side which is an important element to materially affect the price in the open market. In this situation, we are inclined to hold that the authorities below should have considered the said difference due to foreign excha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ground no. 3 4 26. Apropos ground no. 3 and 4, the counsel for the assessee submitted that the Assessing Officer was not justified in restricting the depreciation on computer peripherals at 15 percent as against 60 percent claimed by the appellant. Placing reliance on the judgment of Hon ble Jurisdictional High Court of Delhi in the case of Commissioner of Income Tax vs BSES Rajdhani Bench Ltd. in ITA No.1266/D/2010, the counsel for the assessee submitted that computer system could not work without UPS and such machines are a necessary part of computer system which are certainly not plant or machinery. Ld. DR submitted that in the light of judgment of Hon ble Delhi High Court, he has no serious objection in allowing the depreciation of computer peripherals at the rate as claimed by the appellant assessee. 27. The issue of depreciation of computer peripherals has been settled by Hon ble Jurisdictional High Court of Delhi in the case of BSES Rajdhani Power Ltd. (supra) and respectfully following the same, ground no. 3 and 4 are allowed in favour of the assessee with a direction to the Assessing Officer that depreciation on computer peripherals be allowed to the assessee at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not remedy-less and therefore can take action against the payer under the provisions of Section 201 of the Income Tax Act and compute the amount accordingly. No doubt, if the person (payer) who had to make payments to the non-resident had defaulted in deducting the tax at source from such payments, the non-resident is not absolved from payment of taxes thereupon. However, in such a case, the non-resident is liable to pay tax and the question of payment of advance tax would not arise. This would be clear from the reading of Section 191 of the Act along with Section 209 (1) (d) of the Act. For this reason, it would not be permissible for the Revenue to charge any interest under Section 234B of the Act. 9. We thus, answer the aforesaid question in favour of the assessee as we are of the opinion that the Tribunal has rightly held that the ITA No.491/2008 and connected matters assessee was not liable to pay any interest under Section 234B of the Act following the judgments of the Uttaranchal and Bombay High Courts. 30. Respectfully following the above judgment of Hon ble Delhi High Court, ground no. 5 of the assessee is allowed. Ground no.6 31. Apropos ground no.6, we find ..... X X X X Extracts X X X X X X X X Extracts X X X X
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