9911796707
TMI Blog2015 (4) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... bleaching Earth Sdn Bhd. Malaysia. The said holding company holds 60% of the share capital of the assessee company with the remaining 40% being held by Talco Chemicals Industries Pte. Ltd., Singapore. The assessee company is engaged in trading of Betonite/Fullers Earth Lumps and also carries out minor processing involving quality check and moisture control before exporting it to its AE. The return of income for the year under consideration was filed by it on 30.9.2009, declaring a total income of Rs. 1,90,95,412. During the course of assessment proceedings, it was noticed by the Assessing Officer that the assessee company has entered into the following international transactions with its Associated Enterprises- (a) Sale of raw materials Rs. 19,26,09,329 (b) Reimbursement of expenses Rs. 5,25,722 (c) Recovery of expense Rs. 24,64,094 In order to determine the Arm's Length price (ALP) of the above international transactions, a reference was made by the Assessing Officer to the Transfer Pricing Officer(TPO) under S.92CA(1) of the Act. In the TP Study report submitted by the assessee, TP Analysis was done by applying Transactional Net Margin Method(TNMM) as the most appropriate me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessing was required to be done to be made useful in final consumption. He observed that it is not a manufactured product and even the assessee carried out minor processing which included removing of impurities and moisture, making lumps of specified sizes, drying, storing etc., before selling it. He also noted that the value of plant and machinery of the assessee company was 17.40% out of its total assets. He held that M/s. Ashapura Claytech Ltd. thus was not functionally different from the assessee company and the objection raised by the assessee in this regard was not sustainable. He also overruled the objection of the assessee that M/s. Ashapura Claytech Ltd. being abnormal/super profit making company, could not be taken as comparable, relying inter alia on the decision of the Mumbai Bench of ITAT in the case of Exxon Mobil Com.India Pvt. Ltd. in ITA No.8311/Mum/2010. Accordingly taking the Arithmetic Mean of OP/OC of 23.90% of the four comparables selected by him as Arithmetic Mean Margin and applying the same to the corresponding Operating Costs (including reimbursement of expenses) of Rs. 17,87,16,588, the Arm's Length Price of the international transactions of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing case laws - Capital IQ Information Systems (India) (P) Ltd vs DCIT (2013)32taxmann.com 21 (Hyd- Trib) ....... SAP Labs India Pvt Ltd vs. ACIT Banqalore/2011 44 SOT 156 Bangalore Teva India (P) Ltd (2011) 44 SOT 105 (Mum) (URD) Adobe Systems India Put Ltd vs ACIT 44 SOT 49 (Delhi) (URO) Saunay Jewels (P) Ltd vs ITO (2010) 42 SOT 4 (Mum.) (URO) Sapient Corporation (P) Ltd (2011) 46 SOT 56 (Delhi) (URO) To sum up Ashapura Claytech Ltd has to be rejected both on grounds of functional difference and being a high profit company." 8. The Dispute Resolution Panel found merit in the above submissions made on behalf of the assessee and directed the Assessing Officer to exclude M/s. Ashapura Claytech Ltd. from the list of comparables for the purpose of computing the ALP of the international transactions of the assessee company with its AE by observing as under- "9* We have considered the submission of the appellant. The issue in dispute is regarding inclusion of Ashapura Claytech Limited as one of the comparables. The assessee has not controverted rejection of two of its comparables neither the method applied or choice of PLI. The objection is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the observations/findings recorded by the Transfer Pricing Officer in this regard have not been properly appreciated by the Dispute Resolution Panel, while directing the exclusion of M/s Ashapura Claytech Ltd. from the list of comparables on the ground of difference in product/functions. 10. The learned counsel for the assessee, on the other hand, took us through the profile of the assessee company as well as that of M/s Ashapura Claytech Ltd. placed in his paper-book to explain that not only the products of the two companies are different, but even the functions performed by them are entirely different. He submitted that the product, viz. Grey Bentonite Clay/Fullers Earth Lump, is purchased by the assessee from the mine owners and the same is sold in the same form, after removing impurities and moisture and making lumps of specified sizes after drying. He contended that no major process thus is carried on by the assessee and the product is sold almost in the same form, which does not constitute any manufacturing. He contended that the assessee thus is engaged merely in the trading of Grey Bentonite Clay/Fullers Earth Lumps whereas M/s Ashapura Claytech Ltd. is converting G ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
