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2015 (11) TMI 269 - ITAT CHENNAI

2015 (11) TMI 269 - ITAT CHENNAI - TMI - Transfer pricing adjustment - leverage of 5% disallowed - whether assessee is entitled for the benefit of + 5% tolerance margin for the purpose of determining the armís length price of the international transaction as variation between the armís length price computed by the Transfer Pricing Officer and price at which the international transaction has actually been undertaken which does not exceed 5% of the latter? - Held that:- Second proviso to sec 92C(2 .....

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length price. This ground of the assessee is allowed.

The transfer pricing officer is not justified in comparing with the average price published by the cashew bulletin of cashew export council with that of price mentioned in individual transaction for the products. Accordingly, we direct the TPO to compare the average monthly price to the product published in cashew bulletin with the average price charged by the assessee for its product and decide accordingly. - Decided in favour of .....

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ee availed 150 days credit for payment. Being so, the price was charged little more than the rate mentioned in the CEPC Journal (External data). If due credit is given to interest @12% for the credit period, there is no necessity for TP adjustment. This plea of the assessee is correct. In our opinion, due weightage is to be given towards interest benefit enjoyed by the assessee by availing credit for 150 days for payment and Rule 10B(1)(a)(ii) of the Income Tax Rules, 1962 also permits such bene .....

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of Income-tax (Appeals)-V, Chennai, dated 02.09.2013 for the assessment year 2009-2010. 2. The Commissioner of Income Tax (Appeals) has raised the following grounds:- 2.1 The learned Assessing Officer has erred in adding C77,58,955/- towards adjustment in Arms Length Price, determined by TPO as per the orders of the latter dated 31.12.2012. 2.2 The learned TPO erred in determining Arms Length Price of the AE purchase at C37,13,20,434/- as against C37,90,79,389/- admitted by assessee. 2.3 The lea .....

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sociated Enterprise by C77,58,995/-. The necessary approval of the CIT, Chennai III was conveyed vide C.No.3027/III/2011-12, dated 19.07.2011. The assessee had declared the value of purchase of raw materials from its Associated Enterprise namely M/s. Padworth Company Private Limited at C37,90,79,389/-. The TPO has determined the Arms Length Price of the Associated Enterprise purchasers at C37,12,20,434/- thereby reducing the purchase price by C77,58,955/-. As per the provisions of section 92CA(4 .....

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. 234B and section 234C of the Act. Aggrieved , the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). 4. The Commissioner of Income Tax (Appeals) observed that the deduction of purchase price by C77,58,955/- by the Assessing Officer based on the Transfer Pricing Officers order determined the Arm s Length Price (ALP) of the Associated Enterprise purchased from M/s. Padworth Company Pvt. Ltd. As per the provisions of Sec.92CA(4), the Assessing Officer on receipt of orde .....

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followed by the assessee. However, as per the view taken by the TPO which was adopted by the Assessing Officer which arrived the difference of price variation at C77,58,955/- by the Assessing Officer the same was confirmed against the assessee s method of average monthly import price which does give accurate estimation variation in price and accordingly, the Commissioner of Income Tax (Appeals) confirmed the addition made by the Assessing Officer. Against this, the assessee is in appeal before u .....

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so, there cannot by any transfer pricing adjustment. In our opinion, this plea of the assessee is to be upheld in view of the second proviso to sec 92C(2). Provided that where more than one price is determined by the most appropriate method, the arm s length price shall be taken to be the arithmetical mean of such prices. Provided further that if the variation between the arm s length price so determined and price at which the international has actually been undertaken does not exceed fiver per .....

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is not applicable. This view of us was also supported by the order of the Special bench in the case of M/s. IHG IT Services (India) Private Limited in ITA No.5890/Del/2010, Dated 30.04.2013. 7. Accordingly, we are in complete agreement with the claim of the assessee with regard to benefit for the adjustment of + 5% variation, while computing the arm s length price. This ground of the assessee is allowed. 8. Without prejudice to the above, the ld. Authorised Representative for assessee submitted .....

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not justified in comparing with the average price published by the cashew bulletin of cashew export council with that of price mentioned in individual transaction for the products. Accordingly, we direct the TPO to compare the average monthly price to the product published in cashew bulletin with the average price charged by the assessee for its product and decide accordingly. 9. The next ground is with regard to disallowance of interest. The ld. Authorised Representative for assessee submitted .....

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ee has imported Raw Cashew at an average credit term of 150 days from the AE . The assessee did not avail any working capital loan from the Banks and the entire requirement of Working Capital was met by the Credit term extended by the AE. Accordingly the assessee has computed interest on all the import transactions at the Bank Rate of 12% on the credit term in excess of 30 days. Also as per the Industrial Norms the imports of cashew are being carried out only on immediate payment terms which can .....

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