TMI Blog2013 (9) TMI 632X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the other grounds. Therefore, the order passed by the learned Dispute Resolution Panel is a non-speaking order not stating the objections raised by the assessee and the reasons have also not been given as simply the order of the Transfer Pricing Officer and the Assessing Officer are referred. In the present case, matter restored back to the file of the Dispute Resolution Panel to pass a speaking order stating all the objections of the assessee and disposing them by giving cogent reasons for adjudication of the objections of the assessee – Decided in favor of assessee for statistical purpose. - - - - - Dated:- 25-4-2012 - Order The order of the Bench was delivered by Challa Nagendra Prasad (Judicial Member).-This is an appeal filed by the assessee against the order of the Dispute Resolution Panel (DRP), Chennai dated August 18, 2011 in F. No. DRP/Chennai/Sectt./44/2011 passed under section 144C(5) read with section 144C(8) of the Act for the assessment year 2007-08. Shri Kunj Vaidya and Shri Prasun Kumar Maiti, chartered accountants represented on behalf of the assessee and Shri K.E.B. Rengarajan, junior standing counsel represented on behalf of the Revenue. The main ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... termining the arm's length price of the transactions conducted an independent search of companies for comparables. Learned counsel for the assessee submitted that the Transfer Pricing Officer, has not provided the necessary data and information of 9 companies of which the Transfer Pricing Officer/Assessing Officer is relying on for making the adjustment. He submitted that since the Transfer Pricing Officer/Assessing Officer has not provided for any data about these companies, he is not justified in using these companies as comparables for making the arm's length price adjustment and this is in violation of the principles of natural justice. Learned counsel for the assessee also submitted that before the Dispute Resolution Panel the assessee raised its objection against the action of the Transfer Pricing Officer using the data of these companies at the time of assessment while determining the arm's length price. Learned counsel for the assessee submitted that the Dispute Resolution Panel also failed to consider its objection that no data of 9 companies, which are considered for comparables are provided to the assessee before confirming the order of the Transfer Pricing Officer/Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Financial year 2006-07 Financial year 2006-07 1 Automotive stampings and assemblies Ltd. Prowess 2.07% 0.86% 2 Axles India Ltd. Prowess 5.18% 3.96% 3 Triton Valves Ltd. Prowess 4.52% 0.94% 4 Vybra Automet Ltd Prowess 9.88% 6.99% 5 Wheels India Ltd. Prowess 4.59% 3.16% 6 Lumax Auto Technologies Ltd. Capitaline 2.50% 2.18% Arithmetic mean 4.79% 3.01% The appellant humbly prays before the honourable Bench Members that the search of the learned Transfer Pricing Officer should be rejected and appropriate comparables be accepted. (b) Similarity of cost structure: (i) As per the guidance provided under rule 10B(2) and the OECD Guidelines 2009, Chapter 3, while selecting comparable companies, one has to keep in mind the degree and the level of similarity between the comparable companies and the tested party. Apart from looking into factors of comparability like "characteristics of property or service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % (v) Cost comparability and relationship with profitability Raw material costs comprise about 82 per cent. of the price of Iljin India's finished products. Any fluctuation in raw materials has a direct effect on the company's overall operating margin. Since an assembler would undertake fewer functions that add to the value of a product as opposed to a full-fledged manufacturer, the cost of components/raw materials would be the largest component of the operating cost for an assembler. Very little expenditure would be incurred in terms of value added expenses ("VAE"), amounting to a lower impact of the same on the overall profitability of the assembler. In line with the characterisation of Iljin India as an assembler whose cost component is significantly affected by the raw material price, we had undertaken the economic analysis to compare Iljin India with other assemblers, as opposed to the full-fledged manufacturers compared by the learned Transfer Pricing Officer. Given the two sets proposed by the assessee and the Transfer Pricing Officer, we would like to bring to the notice of your honour the following : Observation 1 While we undertake a quick analysis o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RM/TC OP/sales CPEC 43.78% 4.76% Fairfield Atlas 50.61% 2.51% Flender 53.96% 20.47% Premium Energy 50.51% 18.50% Rane Madras 59.34% 5.49% Rane TRW Steering 56.30% 21.22% Shanti Gears 48.31% 24.03% UT Ltd. 57.67% 7.53% XLO India 60.37% 2.34% ZF Steering 66.08% 14.01% Correlation coefficient -0.10605 Figure 2:Scatter plot indicating correlation between RM/TC and OP/ sales of the Transfer Pricing Officer's comparable companies OP/sales 30.00% 25.00% 20.00% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es India Ltd. 81.44% 5.18% Triton Valves Ltd. 82.45% 4.52% Vybra Automet Ltd. 77.91% 9.88% Wheels India Ltd. 80.47% 4.59% Lumax Auto Technology 86.91% 2.50% Correlation coefficient -0.84505 Figure 3 : Scatter plot including correlation between RM/TC and OP/ sales of the appellant's comparables companies OP/sales 12.00% 10.00% ? 8.00% 6.00% ? OP/ sales Linear (OP/ sales) 4.00% ? ? ? 2.00% ? 0.00% 76.00% 78.00% 80.00% 82.00% 84.00% 86.00% 88.00% RM/TC As opposed to figure 1, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d or to be employed and the risks assumed, by the respective parties to the transactions ; (c) the contractual terms (whether or not such terms are formal or in writing) of the transactions which lay down explicitly or implicitly how the responsibilities, risks and benefits are to be divided between the respective patties to the transactions ; (d) conditions prevailing in the markets in which the respective parties to the transactions operate, including the geographical location and size of the markets, the laws and Government orders in force, costs of labour and capital in the markets, overall economic development and level of competition and whether the markets are wholesale or retail." Also rule 10C(2)(d) states that "In selecting the most appropriate method as specified in sub-rule (1), the following factors shall be taken into account namely : . . . (d) the degree of comparability existing between the international transaction and the uncontrolled transaction and between the enterprises entering into such transactions . . ." Reference to OECD Guidelines : Further, the OECD guidelines provides the following support : "3.43 In practice, both quantitative and qual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... American Jewellery Ltd. [2012] 15 ITR (Trib) 158 (Mumbai), I. T. A. No. 6194/Mum/2008 (vii) Asst. CIT v. Fiat India P. Ltd. 2010-TII-30-ITAT-MUM-TP (viii) Agnity India Technologies Ltd. v. ITO I. T. A. No. 3856(Del)/ 2010 (ix) Deputy CIT v. Cheil Communications India P. Ltd. [2011] 137 TTJ (Delhi) 539, I. T. A. No. 712/Del/2010. The learned Transfer Pricing Officer has not applied any filters and has adopted an arbitrary selection of comparable companies. The learned Transfer Pricing Officer has used only 5-6 of the assessee's products to compare the diverse range of 199 products in the assessee's product portfolio. The appellant would like to state that the number of keywords used in the search process to identify comparable companies is inadequate as it does not capture all the companies which are comparable to the appellant. The keywords used only represent 56.30 per cent. of the total sales value of the appellant. Hence, the learned Transfer Pricing Officer has not considered all the products of the appellant while conducting the search process. As a result the final list of comparable companies selected by the learned Transfer Pricing Officer are not exhaustive and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supplier allows the assessee to have an assured return for all the years. Whereas in the case of this comparable the returns will be in accordance with the market demand. When the market demand goes down the profit margin of the comparable company also goes down. The learned Transfer Pricing Officer has characterised the appellant as a captive but has illogically compared the appellant with entrepreneurial companies who are facing market risks. The profitability of these comparables increase/decrease with the market demand and are dependent on market forces. From the above the learned Transfer Pricing Officer herself contradicts her stand since in one hand she characterises the tested party as a "captive supplier" and on the other hand has compared the same with entrepreneurial companies. This clearly brings out that the entire search process followed by the Transfer Pricing Officer is unscientific and arbitrary. (d) No opportunity provided to the appellant to examine the Transfer Pricing Officer's search process. While performing a comparability analysis the learned Transfer Pricing Officer has rejected companies which do not have data for the financial year 2006-07 and h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly erred in law and in facts to aggregate the uncontrolled transactions with the controlled transactions for computation of the upward adjustment. The above view is also supported by the Tribunal judgments: (i) Mascon Global Ltd. v. Deputy CIT I. T. A. No. 2205/Mds/2010 (ii) Asst. CIT v. Wockhardt Ltd. 6 Taxmaan.com 78 Mum-ITAT (2010-TII-46-ITAT-MUM-TP), (iii) UCB India P. Ltd. v. Asst. CIT [2009] 317 ITR (AT) 292 (Mumbai) (2009-TII-02-ITAT-MUM-TP) (iv) IL Jin Electronics (I) P. Ltd. v. Asst. CIT [2010] 36 SOT 227 (Delhi) The relevant computation of proportionate adjustment as per the Transfer Pricing Officer is as below : Particulars Transfer price % of total cost Sales 229,34,91,028 NA Total cost 221,01,45,898 100% Unrelated party costs 121,66,57,583 53.62% Related party costs 99,34,86,315 46.38% Operating profit (OP) 8,33,45,130 OP/sales 3.63% TP adjustment made by the Transfer Pricing Officer 13,83,86,137 Adjustment restricted to international transaction 6,22 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany'), was established in 1997, as a subsidiary of the Dong-A Automotive Co Ltd., Korea. Iljin Global is a leading manufacturer of wheel bearings supplying to car giants like Hyundai Motors, Chrysler, Ford USA, GM and others. It has six plants all over the world and is one among the top seven bearing manufacturing companies. The assessee is engaged in the assembly of automotive components such as ball joints, wheel bearings, sub-comer modules, sub-axle assembly, different case assembly, engine mounting brackets, fly-wheel assembly, steering linkages, drum. door hinges and checkers, transmission gears. The automobile components are supplied to Hyundai Motor India Ltd. The assessee had filed its return of income for the captioned assessment year on October 29, 2007, declaring total income of INR 71,241,517. B. Order of the learned Assessing Officer and the adjustment made with respect to corporate tax : The learned Assessing Officer in the draft assessment order made the following disallowances and recomputed the taxable income in the following manner : Sr. No. Particulars Amount (INR) 1. Disallowance due to non-deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,992,178. For the above transactions, the assessee had selected comparable uncontrolled price (CUP) method as the most appropriate method for establishing the arm's length nature of its international transactions with associated enterprises ('AE'). As certified by Iljin Global, they have a standard price list for all the supplies to India, which gives the cost, insurance and freight value of the products in US dollars. Iljin Global has also confirmed that any person in India can order any item mentioned in their price list at the unit price mentioned against the respective items in the price list. In view of the above, the price charged by Iljin Global to Iljin India is the same as the list price offered by Iljin Global to any other customer in India. Further, the Commissioner of Customs, Chennai undertook a detailed study to find out the reasonableness of the import price of Iljin India. In their order they have come to the conclusion that the relationship between Iljin India and Iljin Global has not influenced the invoice value of the imports of Iljin India from Iljin Global and that the invoice value should be accepted as the transaction value/assessable value. In view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07-08 by INR 138,386,137. The following are the grounds of the appeal : (a) The learned Assessing Officer/learned Transfer Pricing Officer erred in law and in facts in rejecting the assessee's documentation and conducting a fresh comparability analysis. Further, the analysis is incorrect since it does not follow any quantitative and qualitative steps. For details refer page 9. (b) The learned Assessing Officer/ learned Transfer Pricing Officer erred in law and in facts in including companies in the comparability analysis which do not satisfy the test of comparability (for details refer page 13). (c) The learned Assessing Officer/learned Transfer Pricing Officer erred in law and in facts in not applying multiple year/prior year data for comparable companies while determining the arm's length price. Further, the learned Assessing Officer/learned Transfer Pricing Officer erred in using data as at the time of the assessment proceedings, instead of that available for comparable companies as on the date of preparing the transfer pricing documentation while determining the arm's length price. For details refer page 24. 2. The learned Assessing Officer/learned Transfer Pricing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee undertakes more of a routine assembly function and hence cannot be compared to companies which are involved in full-fledged manufacturing operations, who own patents and conduct extensive research and development. It is humbly submitted herein that the search conducted by the learned Transfer Pricing Officer has resulted in selection of all companies who are full fledged manufacturer. Ideally an appropriate search/benchmarking process should commence with a broad base of companies from where the assessee can identify potentially comparable independent companies. Hence, a typical search process in Prowess/Capitaline Plus should ideally begin with considering the 'economic activity'. This would enable to obtain a broader base of companies which can be further reviewed to obtain a smaller set of potentially comparable independent companies. The same has been considered in a fresh benchmarking analysis undertaken by the assessee which is discussed in page 17. II. Inadequate keywords were used The learned Transfer Pricing Officer had used the following keywords 'gears, flying ring gears, steering gears and front axle assembly' vide paragraph 12.9 of page 6 of the Trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assets employed or to be employed and the risks assumed, by the respective parties to the transactions ; (c) the contractual terms (whether or not such terms are formal or in writing) of the transactions which lay down explicitly or implicitly how the responsibilities, risks and benefits are to be divided between the respective parties to the transactions ; (d) conditions prevailing in the markets in which the respective parties to the transactions operate, including the geographical location and size of the markets, the laws and Government orders in force, costs of labour and capital in the markets, overall economic development and level of competition and whether the markets are wholesale or retail." Also rule 10C(2)(d) states that : "In selecting the most appropriate method as specified in sub-rule (1), the following factors shall be taken into account namely : (d) the degree of comparability existing between the international transaction and the uncontrolled transaction and between the enterprises entering into such transactions . . ." Reference to OECD Guidelines : Further, the OECD provides the following support : Paragraph 3.43 of page 120 : 'In practice, bot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lease be quashed. Since the learned Transfer Pricing Officer has not followed a methodical search process, there is reasonable doubt on the margin computed by the learned Transfer Pricing Officer. Hence the order should be rendered null and void. Ground 1(b) The learned Assessing Officer/learned Transfer Pricing Officer erred in law and in facts in including companies in the comparability analysis which do not satisfy the test of comparability. 1(b)(i) Statement of facts as submitted to the learned Transfer Pricing Officer/Assessing Officer Kindly refer to the facts mentioned earlier in point (c) of page 4 supra. 1(b)(ii) Facts/transfer pricing approach, modified by the learned Transfer Pricing Officer/Assessing Officer In conducting the search the learned Transfer Pricing Officer has selected the comparable companies which do not satisfy the test of comparability. 1(b)(iii) Do you wholly agree with the modifications in the facts by the Assessing Officer ? if not, give reasons pointing the specific fact or facts with which you do not agree along with the reasons and documentary evidence, if any. The assessee disagrees with the comparables selected by the learned T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the raw material/total cost are as follows : CPEC Ltd. 29.27% Fairfield Atlas Ltd. 50.61% Flender Ltd. (Merged) 53.36% Premium Energy Transmissions Ltd. 50.51% Rane (Madras) Ltd. 59.34% Rane TRW Steering Systems Ltd. 56.30% Shanthi Gears Ltd. 48.31% U T Ltd. 57.60% XL O India Ltd. 60.37% Z F Steering Gear (India) Ltd. 66.00% (ii) Related party transactions: The related party disclosure as applicable to the Indian companies is governed by the Accounting Standard 18 (AS 18) and as prescribed by the Institute of Chartered Accountants of India (ICAI). The accounting standard defines the applicability to the companies and provides the broad framework of disclosures in terms of related parties. The standard applies only to the following companies : Enterprises whose equity or debt securities are listed in India or outside India. All commercial, industrial and business reporting enterprises, whose turnover for the immediately preceding accounting period on the basis of audited financial statements exceeds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Transfer Pricing Officer to review the application of the related party filter of 15 per cent. as set-out by the hon'ble Delhi Tribunal. Hence, the following comparable companies selected by the learned Transfer Pricing Officer should be rejected based on related party transactions filter : Fairfield Atlas Ltd. 53.49% Flender Ltd. (Merged) 17.64% Z F Steering Gear (India) Ltd. 18.34% (iii) Net fixed assets (NFA)/sales : The assessee being a routine assembler is less capital intensive when compared to manufacturers who are more capital intensive. The NFA/sales of the assessee is 20 per cent. (456,445,343 / 2,293,491,028). Therefore, comparable companies having NFA/sales greater than 30 per cent. were rejected to exclude all companies which are highly capital intensive as they employ high level of fixed assets to churn out equal volume of sales compared to the assessee. Hence, the following comparable companies selected by the learned Transfer Pricing Officer should be rejected based on NFA / sales filter. Shanthi Gears Ltd. 39.07% Fairfield Atlas Ltd. 79.17% (iv) Net intangible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undertaken by the assessee : The assessee conducted a search for identifying the comparable companies before the specified date based on the data available in the database at the time of conducting the benchmarking analysis. The assessee applied the transaction net margin method as the most appropriate method for determining the arm s length price with respect to its international transactions and had considered the return on total sales ('OP/sales') (i.e., operating profit/ total sales) as the relevant profit level indicator (PLI). As mentioned earlier, the assessee followed a methodical benchmarking analysis/search process by applying the necessary and appropriate filters and qualitative reviews to determine the arm's length pricing of international transactions with its associated enterprise. The details are as follows : (i) Search from Prowess To identify comparables which performed similar functions as that of Iljin India, the assessee started by using the industry classification (economic activity) query module as given in Prowess and selected companies classified under the manufacturing industry with a sub-classification of 'transport equipment'. The assessee furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia Total universe of companies available in Prowess 18.249 Selected companies with sales greater than zero and the ratio of sales manufacturing to sales more than 50% over the aforesaid time period so as to capture all possible manufacturers 2.155* Selected companies classified under manufacturing of 119 Transport equipment industry with a sub-classification of automobile ancillaries drive transmission and steering parts and suspension and braking parts , drive transmission and steering parts , drive transmission and steering parts and engine parts , drive transmission and steering parts and others , engine parts and drive transmission and steering parts , engine parts, drive transmission and steering parts and suspension and braking parts , engine parts, drive transmission and steering parts and suspension and other parts , drive transmission and steering parts and equipment suspension and braking parts and engine parts , equipment and body parts and other parts Companies that are not owned by the Government and co-operative enterprises were selected as such the economic mod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n CapitalinePlus. To start with, the assessee identified companies, which had sales greater than zero. From these, additional companies, i.e., companies for which data was not available in Prowess were identified. Our search for additional companies in CapitalinePlus, resulted in a total of 330 companies. It may be noted that in most of the companies, CapitalinePlus does not provide financial data such as break-up of sales into sales from manufacturing, trading and/or service income, which are required to at least broadly identify a company as a manufacturer or trader/ reseller or a service provider. Hence, to start with the assessee qualitatively analysed these 330 companies so as to classify them into different industries. In order to have consistency with Prowess, in respect of the nomenclature of industries, the assessee classified these additional companies into 23 broad industry classifications as given in Prowess. This process also included evaluation of NIC information provided by CapitalinePlus for these companies. Thereafter, to initiate the search the assessee selected companies operating in manufacturing industry with a sub-classification of transport equipment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 Companies whose direct and indirect cost of production to total cost ratio was less than 75 per cent. were rejected to include functionally comparable companies 3 Companies with research and development to sales 1 per cent. were excluded to differentiate from a contract manufacturer 3 Companies with ratio of the sum of advertising, marketing and distribution expenses to sales less than 3 per cent., were selected, thereby resulting in identification of comparables that do not have ownership of marketing intangibles. 3 Companies with ratio of royalty to sales less than 1 per cent., were selected, thereby resulting in identification of comparables that do not have ownership of intangibles. 3 Qualitative companies that were not functionally comparable and that had related party transactions were eliminated. 1 * May include certain companies having changed their financial year during the period under consideration Accept/reject matrix : With respect to comparable companies accepted/rejected from Prowess and CapitalinePlus, an accept/reject matrix is provided vide i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g A 5 per cent. benefit-refer Item No. 10 of "Reference of Appendix-Transfer Pricing") earned by the assessee for the year 2006-07, is higher than the arithmetic mean of comparable companies. Further without prejudice to the use of contemporaneous data (single year) the assessee humbly puts forth the analysis of comparables with values for the financial year 2006-07 as under : S. No. Company name* Source Operating pro-fit/sales for the financial year 2006-07 Adjusted OP/sales for the -financial year 2006-07 1 Automotive Stampings and Assemblies Ltd. Prowess 2.07% 0.86% 2 Axles India Ltd. Prowess 5.18% 3.96% 3 Triton Valves Ltd. Prowess 4.52% 0.94% 4. Vybra Automet Ltd. Prowess 49.88% 6.99% 5. Wheels India Ltd. Prowess 4.59% 3.16% 6. Lumax Auto Technologies Ltd. Capitaline 2.50% 2.18% Arithmetic mean 4.79% 3.01% * Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted the use of the multipleyear data. 1(c)(iii) Do you wholly agree with the modifications in the facts by the Assessing Officer ? If not, give reasons pointing the specific fact or facts with which you do not agree along with the reasons and documentary evidence. if any. Comparable data relied on by the assessee is contemporaneous As the learned Panel would note, the assessee is in compliance with the documentation requirement as enunciated in section 92D of the Act read with rule 10D(4) of the Rules, and had maintained the contemporaneous transfer pricing documentation for the financial year 2006-07. Rule 10D(4) prescribes as follows : "the information and documents specified in sub-rules (1) and (2) should as far as possible, be contemporaneous and should exist latest by the specified date." In this regard, the assessee would like to bring to notice that, as per rule 10D(4) supra, the data to be used for the purpose of uncontrolled comparable analysis should relate to the relevant financial year and be available as on the specified date (i.e. the due date of filing of return of income for the financial year 2006-07 being October 31, 2007). The above two conditions pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies Act, 1956, an assessee is normally required to file its annual report with the Registrar of Companies ("RoC"), comprising, inter alia, its financial statements latest by October 31*. (c) The assessee has relied on the financial databases, viz., Prowess and Capitaline that are publicly available databases containing financial information of public companies. (d) A significant limitation while working with electronic databases is the time lag from the date of filing of the annual report of an assessee with the Registrar of Companies and the updation of the same in the database. It is respectfully submitted that the average current-year data availability for Prowess and Capitaline combined is 35 per cent. of the companies in the total universe. Please refer item No. 11 of "Reference of Appendix-Transfer Pricing" on the said statistics. (e) From the foregoing it is apparent that the financial data for the relevant financial year, i.e., the financial year 2006-07, may not be available * An Indian company is required to hold its annual general meeting within six months from the end of the financial year, i.e., latest by September 30 (section 210 of the Companies Act, 1956), a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant issues are summarised below : .. (d) Rule 10D(4) clearly specifies that the information relating to the international transactions, including the comparability analysis, has to be kept and maintained latest by the specified date, i.e., the date of filing of the income-tax return (in the instant case November 30, 2003). However, the Transfer Pricing Officer conducted a fresh comparability analysis during January-February, 2006, using the data which was not available after the specified date . . . The Income-tax Appellate Tribunal further held that "It is important to note that rule 10B(4) casts an obligation on the taxpayer to conduct the comparability analysis using data for the relevant financial year. However, rule 10D(4) makes it mandatory for the taxpayer to ensure data that exists by the time specified under the Act, i.e., 31st October of the relevant assessment year . . . Accordingly, for the purpose of conducting the comparability analysis, the data should : (a) relate to the relevant financial year if the proviso to rule 10B(4) is not attracted ; (b) exist by the specified date. It should be noted that both conditions are cumulative in nature. If any one of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e party is disabled to perform it, without there being any default on his part, and there is no remedy for him, the law will in general excuse him. When the obligation is one implied by law, impossibility of performance is a good excuse, say, impotentia excusat legem. The law regards the order and course of nature and will not force a man to demand that which he cannot recover. The law will not itself attempt to do an act which would be vain-lex nil frustra facit-nor enforce one which would be frivolous-lex neminem cogit ad vanaseu inutilia-the law will not force anyone to do a thing vain and fruitless." The above principle has also been reiterated in Mafatlal Apparel Mfg. Co. Ltd. v. Deputy CIT [1998] 65 ITD 234 (Mumbai) (61 TTJ 323). 1(c)(vi) Legal argument relied upon by the Assessing Officer Rule 10B(4) 1(c)(vii) Case law relied upon by the Assessing Officer None. 1(c)(viii) Any additional new case law which the assessee may rely upon None. The assessee desires leave to rely upon any new case law during the proceedings before the honourable Panel. 1(c)(ix) Factual and legal arguments against the additions proposed by the Assessing Officer : The factual and leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the views of the learned Transfer Pricing Officer. The assessee would like to submit that the learned Transfer Pricing Officer acknowledges the fact that there has to be only one arm's length value and not multiple arm's length value. Hence, if the customs authorities have accepted the invoice value to be at arm's length, then the same should be considered at arm's length for transfer pricing purpose as well. 2(iv) Legal arguments submitted by the assessee None. 2(v) Case law relied upon by the assessee None. 2(vi) Legal argument relied upon by the Assessing Officer None. 2(vii) Case law relied upon by the Assessing Officer None. 2(viii) Any additional new case law which the assessee may rely upon None. The assessee desires leave to rely upon any new case law during the proceedings before the honourable Panel. 2(ix) Factual and legal arguments against the additions proposed by the Assessing Officer The learned Transfer Pricing Officer has wrongly rejected the valuation of import of components conducted by the customs authority. This cannot be accepted and the assessee prays before the learned Panel that it considers the valuation of import of components conducted by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pute Resolution Panel M/s. Prasum Maiti, Chandra Mohan and Ashish Mehta, learned authorised representative for the assessee appeared and canvassed arguments that the assessee's claim has already been filed along with Form No. 35A. They were heard as also with whom the case was discussed. 4. Having taken into consideration the conspectus of the case at hand we find that the assessee is principally engaged in manufacture of automobile components (as stated in the Notes to Accounts of the annual report). The associated enterprises transactions relate primarily to the import of raw materials, tools, stores and spares and import of machinery. The method adopted by the assessee is comparable uncontrolled price method (though the assessee initially maintained that there are no international transactions, subsequently, it adopted comparable uncontrolled price method). The comparable transactions given by the assessee for comparable uncontrolled price method were based on the Customs Department's order accepting the price and price list issued by the associated enterprises, which is claimed to be applicable for all parties. The Transfer Pricing Officer examining the matter rejected the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be in order having considered that (i) the comparables given by the assessee for comparable uncontrolled price method (customs valuation and price list of associated enterprise) were flawed and not acceptable ; (ii) the international transactions included import of capital goods, for which no comparables were provided ; (iii) the assessee has a large range of auto products, for which it is difficult to find comparables with accurate product and functional comparability. The decision of the Transfer Pricing Officer to adopt transaction net margin method as the appropriate method is therefore validated. As against high degree of product/service similarity required for comparable uncontrolled price, product/service similarity is not that critically important in transaction net margin method adopted by the Transfer Pricing Officer. In transaction net margin method, the functions performed and risks assumed by the tested party and comparables need to be broadly similar, as in this case. 9. Now coming to the objections to the basket of comparables taken by the Transfer Pricing Officer it is found that the same is not tenable after having established that the comparable unco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Transfer Pricing Officer is valid and correct. 12. Hence, no adjustment to the Transfer Pricing Officer order is called for. The grounds agitated by the assessee are therefore dismissed. The Assessing Officer may proceed to finalise the order on above lines." On a careful consideration of the order passed by the Dispute Resolution Panel, we find that the contention of various objections of the assessee have not been decided by the Dispute Resolution Panel. The Dispute Resolution Panel has not dealt with each of the objections raised by the assessee by passing a speaking order and giving cogent reason for not accepting the objections of the assessee. In the similar facts and circumstances where the Dispute Resolution Panel has passed a non-speaking order, the Delhi "H" Bench of the Tribunal in the case of Evalueserve.com P. Ltd. v. ITO [2012] 16 ITR (Trib) 442 (Delhi) Ward 11(2), in I. T. A. No. 5149/Del/2010 and S. A. No. 110/ Del/2011, order dated November 3, 2011, has held as under (page 446): "10. We have carefully considered the rival submissions. The order passed by the Dispute Resolution Panel has already been reproduced in the above part of this order. The matter wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5) cannot be passed after nine months from the end of the month in which draft order is forwarded to the eligible assessee. Under sub-section (13), on receipt of directions issued under subsection (5), the Assessing Officer has to pass the assessment order in conformity with the directions without providing any further opportunity of being heard to the assessee within one month from the end of the month in which such directions are received. 11. The directions passed by the Dispute Resolution Panel under section 144C(5), as it can be seen in the present case, are not speaking about what objections were raised by the assessee and how they have been found to be not acceptable. The Dispute Resolution Panel has simply observed that all the questions raised by the assessee have been answered in detail by the Transfer Pricing Officer and by the Assessing Officer in the draft order. The rejections of comparables are based on detailed reasoning and after applying reasonable filters. The denial of working capital adjustment as also capacity adjustment is based on cogent reasoning, use of current data has been found more appropriate and fresh search has been rejected as there is no valid r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etition and four weeks after its disposal shall stand excluded, while computing the limitation for the Department to pass an assessment order. The writ petition is allowed to the extent indicated above without any order as to costs. Order dasti under the signatures of the Court Master." [WP(C) 7028/2010] 12. This Tribunal in many of such cases has restored the issue to the file of the Dispute Resolution Panel for passing a speaking order on each of the objection of the assessee raised before it. Therefore, we find that it is a fit case where the entire matter should be restored back to the file of the Dispute Resolution Panel to pass a detailed order stating all the objections of the assessee and disposing them by giving a cogent and germane reason for adjudication of the objections of the assessee. We direct accordingly. After receiving the order from the Dispute Resolution Panel, the Assessing Officer will again pass order under section 144C(13) and the present assessment passed by the Assessing Officer is set aside as the Dispute Resolution Panel is directed to readjudicate the objections raised by the assessee as per directions give above. We direct accordingly. 13. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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