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2016 (1) TMI 637 - ITAT CHENNAI

2016 (1) TMI 637 - ITAT CHENNAI - TMI - Addition towards adjustment of Arm’s Length Price - as per AR arithmetical mean in respect of seven shipments should be arrived at determining the ALP and if it is variation is below 5%, there could not be any TP adjustment in view of sec.92(C) - Held that:- The seven sets of international transactions undertaken by the assessee cannot be considered as ‘closely linked’. We, therefore, refuse to accept the contention of the assessee’s counsel. Being so, we .....

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jurisdiction for the purpose of determining of ALP by examining each transaction separately.

Further, in this case, price variation is more than 5%, Assessing Officer is justified in making adjustment of ALP determined by the tax payer and the proviso to sec.92C provides that where more than one price may be determined by the most appropriate method, the ALP shall be taken to be the arithmetical mean of such prices. In the instant case only one price has been determined under most app .....

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the Revenue is directed against the order of the Commissioner of Income-tax(Appeals) dated 11.10.2007. 2. The only ground raised by the Revenue in this appeal is that the CIT(Appeals) erred in deleting the addition of ₹ 30,07,072/- towards adjustment of Arm s Length Price. 3. The brief facts of the case are that the assessee has imported coal and supplied to various parties in India. The coal was imported from Dubai and such coal had the original of Chinese, South African and Indonesia Co .....

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ies, some variation as pointed out by the assessee does arise, which has been properly explained. It was also submitted that if at all, any adjustments were required, the same should have been made in accordance with the provisions of sec.92C(2) of the Act, whereby the TPO has to adopt the arithmetical mean of the same product for determining the Arm s Length Price(ALP). According to the ld. AR, the TPO has not properly applied the arithmetic mean as given in the proviso to sec.92(C) of the Act. .....

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ure the tax payer are not put to avoidable hardship unnecessarily. He further observed that the assessee is carrying on import and supply of coal and during the previous year relevant to the assessment year 2004-05, there were 7 shipments of coal. He observed that the contention of the assessee was that CUP is the most appropriate method for the purpose of arriving at the ALP and the assessee compared the prices charges by the AE viz. coal and oil LLC for the supplies made to the assessee as aga .....

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5.04%, the TPO recommended adjustments of ₹ 30,07,072/- as adjusted price difference, which was adopted by the Assessing Officer in the assessment order. 4.2 The CIT(Appeals) observed that the TPO has not properly applied the arithmetical mean in respect of all the shipments. According to the CIT(Appeals), as per proviso to sec.92C(2) of the Act, where more than one price is determined by the most appropriate method, the ALP shall be taken to the arithmetical mean of such prices or at the .....

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rived at in determining the percentage of variation to see whether the variation is exceeding 5% of arithmetical mean. Further, the CIT(Appeals) observed that the arithmetical mean including interest, penal charges and other suppliers purchases is 1.92% and before these charges, the arithmetical means is 1.86%. According to him, the assessee has demonstrated its imports of coal is at ALP from Indian transfer pricing perspective and there is no basis for any adjustment. Accordingly, he deleted th .....

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linked. We have gone through Rule 10A(d) and 10B of the I.T. Rules. On a combined reading of these two Rules, a number of transactions can be aggregated and construed as a single transaction for the purposes of determining the ALP provided that such transactions are closely linked . Ostensibly the rationale of aggregating closely linked transactions to facilitate determination of ALP envisaged a situation where it would be inappropriate to analysis the transactions individually. The proposition .....

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tions by adopting the most appropriate method. In other words, in a given case where a number of closely linked transactions are sought to be aggregated for the purposes of bench marking with uncontrolled transactions, such an approach can be said to be well established in the transfer pricing regulation having regard to Rule 10A(d) of the Rules. Though it is not feasible to define the parameters in a water tight compartment as to what transactions can be considered as closely linked , since the .....

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