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2016 (5) TMI 39 - ITAT MUMBAI

2016 (5) TMI 39 - ITAT MUMBAI - TMI - Addition on account of undervaluation of equity shares considered as deemed loan and interest computed thereon - Held that:- The issue stands covered in favour of the assessee by the judgment of the Hon’ble Jurisdictional High Court, delivered in the case of Vodafone India Services Pvt. Ltd. (2014 (11) TMI 881 - BOMBAY HIGH COURT ) held that the issue of shares at a premium by the petitioners to its non -resident holding company does not give rise to any int .....

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he CUP range. In our opinion the date chosen by the assessee was more appropriate than the date adopted by the TPO. The DRP itself had held that nearest CUP data should be considered. In the case under consideration the assessee had adopted the data of 30th January which was the nearest date for the transaction in question. Therefore, in our opinion adjustment made by the TPO was not proper.- Decided in favour of assessee - I. T. A. /2255/Mum/2014, I. T. A. /2070/Mum/2014 - Dated:- 27-4-2016 - S .....

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ar under consideration. Assesseecompany, engaged in the business of trading of petrochemicals, filed its return of income, declaring income of ₹ 37. 20 crores. The AO completed the assessment, on 28. 02. 2001, u/s. 143(3)r. w. s. 144C(13)of the Act, determining the income of the assessee at ₹ 2, 09, 15, 37, 490/-. 2. First ground of appeal is about addition made on account of undervaluation of equity shares considered as deemed loan and interest computed thereon. At the time of heari .....

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ns of Chapter X of the Act would not arise. Respectfully, following the above judgment of the Hon ble Bombay High Court, we decide Ground no. 1 in favour of the assessee. 3. Second ground of appeal as about addition made on account of rejection of Comparable Uncontrolled Price(CUP)in respect of the international transactions entered in to by the assessee with its Associated Enterprises(AEs). During the assessment proceedings, the AO made a reference to the Transfer Pricing Officer (TPO)to determ .....

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s to arrive at the ALP rate, that it had used the date of the place from where the goods were imported, that it had entered in to 245 international transactions. Out of the total transactions, the TPO accepted the ALP of 238 cases. For remaining seven transactions, he made adjustments. After receiving the order of the TPO, the AO issued a draft order to the assessee. It filed objections before the DRP for each transactions. The DRP deleted the addition in respect of one transaction. However, adj .....

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e the data of 02. 03. 2009 and held that on that date rate of Sovesso100 was ₹ 27. 54 per kg, that the transaction was not at arm s length. The DRP held that beyond the nearness of date the assessee had not mentioned as to how the transaction was otherewise comparable in terms of volume or any other details, that in absence of such details the method adopted by the TPO had to be upheld. 3. 1. Before us, the Authorised Representative(AR) argued that the DRP itself had upheld the nearest dat .....

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5 lakh Kgs. to 8. 3 lakh Kgs. was same i. e. ₹ 58. 88 per Kg. , that the volumes picked up by the assessee were comparable to the transaction of 4. 98 Kgs. , that the AO had cherry-picked the lowest rate of ₹ 27. 54 per Kg. for making adjustments, that the comparison of the volume data adopted by the AO and the TPO clearly prove that volume had any impact on the price, that the DRP had heavily relied upon the volume theory. In these circumstances we are of the opinion that the data b .....

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nion that the decision of the DRP cannot be endorsed. 4. Second transaction is of purchase of 19. 54 lakh Kgs. of Toluene @Rs. 47. 86 per Kg. The material was purchased on 05. 06. 2008. As the data for that day was not available the assessee used average rate of CUP data of 29. 05. 2008. However, the TPO took the lowest rates from the data used by the assessee and held that there were six transactions ranging from 75000kg. to 5 lakhs Kgs. , that price range varied from ₹ 44. 18 to ₹ .....

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as not consistent in selecting the comparables. DR supported the order of the DRP. 4. 2. We have considered the material available on record. We find that the assessee had taken the average price of the transactions entered into on 29. 05. 2008, that the TPO had picked up the lowest rate . In our opinion picking up of a convenient or favourable data is not a proper method to determine the ALP. As per the provisions of section 92C(2)of the Act an arithmetic mean of the prices has to be adopted as .....

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import of 1 lakh Kgs. of Maleic Anhydride. The assessee had purchased the goods@ ₹ 76. 55 per Kg. It arrived at the average rate of ₹ 76. 88 per Kg. as the CUP rate. The TPO adopted the rate of ₹ 68. 76 per Kg. which was the lowest rate of all the transactions of 01. 08. 2008. The DRP upheld the order of the TPO holding that the assessee had mentioned that average taken by it considered the volume to transactions also. 5. 1. Before us, the AR stated volume of the product did n .....

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goods were purchased @ ₹ 78. 43 Rs. per Kg. Similarly, 41, 000Kgs. goods were purchased @Rs. 76. 28 per Kg. We also find that the TPO had accepted the assessee s CUP dt. 30. 7. 2008 while determining the ALP of transaction dt. 29. 7. 08 for a transaction of One lakh Kgs. (pg-92 of the PB). considering these facts we find that the assessee had imported the material at the rate which fits within the ± 5% range of the CUP rate. The transaction is at arm s length. 6. The next transacti .....

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a of 31. 1. 2009. As against the rate of ₹ 26. 71 per Kg the TPO took the average of ₹ 21. 74 per Kg based on the data of 23. 1. 2008. The DRP following its order for the earlier transaction upheld the order of the TPO. 7. 1. Before us, the AR contended that the assessee had used CUP dated 30. 1. 2009, that the TPO had used 23. 1. 2009, but the date used by the TPO was further away than the CUP which the assessee had used. The DR supported the order of the DR. 7. 2. We find that the .....

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transaction in question. Therefore, in our opinion adjustment made by the TPO was not proper. 8. Now we would take transaction No. 6 . The assessee had purchased 4 lakh Kgs of Toluene @Rs. 26. 38 per Kg. Since the comparable data for 12. 2. 2009 was not available the assessee used the data of 16. 2. 2009 (Rs. 26. 83 per Kg). The TPO chose to use data for 31. 1. 2009 (Rs. 24. 10 per Kg. ). The DRP upheld the order of the TPO referring to the earlier transactions. 8. 1Before us, the AR made same s .....

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