TMI Blog2014 (12) TMI 467X X X X Extracts X X X X X X X X Extracts X X X X ..... gnoring that period when, supplies are not made either to Associated Enterprises party or non-Associated Enterprises party - Further, if March-07 supplies are removed from the yearly benchmarking average, even yearly average rates become comparable and within the permissible 5% variation scope as follows – thus, the additions made by the TPO is set aside – Decided in favour of assessee. - ITA No.1711/PN/2011 - - - Dated:- 29-9-2014 - SHRI SHAILENDRA KUMAR YADAV AND SHRI R.K. PANDA, JJ. For The Appellant : Shri Kishor Phadke For The Respondent : Mrs. Mini Verma ORDER PER SHAILENDRA KUMAR YADAV: This appeal has been filed by the assessee is directed against the order dated 21/10/2011 passed u/s 143(3) r.w.s. 144C after considering the guidelines issued by the Dispute Resolution Panel vide it s order dated 20/05/2011. The modified grounds of appeal of the appellant read as under. 1. The ACIT, Circle-6, Pune (AO) erred in law and on facts in making a reference to the DCIT (Transfer Pricing)-IV, Pune (TPO) u/s 92CA of the ITA, 1961 for determining the Arm s Length Price (ALP) of the appellant s International Transactions; without forming any opinion as envisa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The reasons for different prices at different times are factors such as petroleum price, yarn price, glass price, etc. on a global basis. 4. A.Y. 2007-08 was first year of operations of the Company and company required strong support from the associated companies to achieve the volume and use of the capacity. During the bench marking process, in order to compare the price at which goods are sold to Associates Enterprises and Non Associated Enterprises, the assessee company made adjustment to for selling and marketing expenses of 3% on sale price and credit risk of 3% on sales. The appellant also contented before the TPO s towards the proviso to section 92C wherein 5% tolerance limit has been provided for. 5. However, the assessee company s benchmarking was not accepted by the TPO by observing that, if prices are compared on yearly average basis, the company s benchmarking was incorrect. The assessee company objected to the same by stating that there has never been any attempt for passing profit from the Indian assessee company to the parent USA company. However, the company s contentions were rejected by the TPO and addition of ₹ 1,13,28,030 was proposed by the TPO. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arison of the yearly average rates for the purpose of benchmarking. He also submitted that the prices of the goods supplied by the company increased substantially in the month of Feb-07 and Mar-07 during which period, there was no / low supply to the Associated Enterprises party, though there was sizeable supply to the non- Associated Enterprises party. The Learned Assessee s Representative submits that, due to this price fluctuation, the whole year s average rate is vitiated. The Learned Assessee s Representative has further invited our attention to the bill-wise detailed working wherein, the transactional rates were listed for Associated Enterprises and non-Associate Enterprise parties separately and chronologically. A perusal of the said workings reveals that the rates charged by the assessee company to the Associated Enterprises party vis- -vis non-Associated Enterprises party were in close range. In fact, in many situations, the Associated Enterprise rates were slightly more / higher than the non-Associated Enterprises rates. The said bill-wise working was also supported with month-wise averages. The following situation prevails on a month-wise average basis working. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , if the benchmarking is done transaction-by-transaction, no additions are warranted and so on. In this regard, we have observed the OECD commentary put forth by the learned Assessee s Representative and the relevant Para of the OECD commentary reads as under. A.3.1 Evaluation of a taxpayer s separate and combined transactions 3.9 Ideally, in order to arrive at the most precise approximation of arm s length conditions, the arm's length principle should be applied on a transaction-by-transaction basis. However, there are often situations where separate transactions are so closely linked or continuous that they cannot be evaluated adequately on a separate basis. Examples may include 1. Some long-term contracts for the supply of commodities or services, 2. rights to use intangible property, and 3. pricing a range of closely-linked products (e.g. in a product line) when it is impractical to determine pricing for each individual product or transaction. Another example would be the licensing of manufacturing know-how and the supply of vital components to an associated manufacturer; it may be more reasonable to assess the arm's length terms for the two items together rather ..... X X X X Extracts X X X X X X X X Extracts X X X X
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