TMI Blog2015 (4) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... ter of the product and what is ultimately sold by the assessee company remains to be the same commercial product, viz. Grey Bentonite Clay/Fullers Earth Lump. On the other hand, M/s Ashapura Claytech Ltd. is using Grey Bentonite Clay/Fuller’s Earth Lump as raw material and after carrying out different operations, such as crushing, milling, sieving, etc., it is producing Bentonite/Bio-green Granules which is highly efficient and economic material for use in agricultural pesticides, catlitter and floor absorbents. All its operations to convert Grey Bentonite Clay/Fullers Earth Lump into Bentonite/Biogreen Granules are carried out with the help of different machinery at different stages and what is ultimately produced, namely Bentonite/Biogreen Granules is a new product which is commercially different from the Grey Bentonite Clay/Fullers Earth Lump used as raw material. The activities carried on by the assessee company as well as the M/s.Ashapura Claytech Ltd. thus clearly show that the assessee company is engaged only in trading of Grey Bentonite Clay/Fullers Earth Lump, whereas M/s Ashapura Claytech Ltd. is engaged in the manufacturing of Bentonite Biogreen Granules, where Grey B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th 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 method and taking the Operating Profit to Operating Cost (OP/OC) as Price level indicator (PLI). In the said report, five comparables were selected by the assessee by applying certain filters and since the Arithmetic Mean of OP/OC of the said five comparables at 11.52% was within the range of +/-5% of its own OP/OC of 10.53% in relation to the international transactions with AE, the price charged to the AE in respect of these transactions was claimed by the assessee as at Arm s Length. 4. After going through the relevant documents maintained by the assessee and after anlaysing the relevant transactions, the TPO was of the opinion that the method adopted by the assessee for selecting the comparables suffered from certain defects and the same, therefore, had resulted in selection of inappropriate comparables. He, therefore, proceeded to conduct a new search for selecting the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /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 ₹ 17,87,16,588, the Arm s Length Price of the international transactions of the assessee company with its AE was worked out by the TPO at ₹ 22,14,29,852 as against the price of ₹ 19,58,79,890 charged by the assessee. The difference of ₹ 2,55,49,952 thus was worked out by the TPO as TP adjustment that is required to be made in respect of international transactions of the assessee with its AE. 6. When the addition on account of TP adjustment worked out by the TPO was proposed to be made by the Assessing Officer to the total income of the assessee in the draft assessment, objections were filed by the assessee, before the Dispute Resolution Panel which mainly included the objection of the assessee for inclusion of the M/s.Ashapura Claytech Ltd. as comparable. 7. In support of its claim for exclusion of M/s. Ashapura Claytech Ltd. from the list of final comparables, the following submissions were made on behalf of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee 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 restricted to mostly inclusion of Ashapura Claytech Limited. On going through the detailed submission of the assessee as mentioned in earlier paragraph, we find that the following comparables were selected by TPO while arriving at ALP price as under: Sl.No. Name of the assesse OR OC OP OP/OR OP/OC 1. Ashapura Claytech Ltd. 6.38 4.29 2.09 32.76 48.72 2. Ashapura International Ltd 46.55 42.12 4.43 9.52 10.52 3. Bombay Minerals Ltd. 55.75 45.34 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es 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 Grey Bentonite Clay/Fullers Earth Lump into Bentonite Bio-green Granules, after carrying out different operations with the help of plant and machinery. He contended that the said entity thus is clearly carrying out the manufacturing activity, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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