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2016 (8) TMI 1049 - PUNJAB AND HARYANA HIGH COURT

2016 (8) TMI 1049 - PUNJAB AND HARYANA HIGH COURT - TMI - Transfer pricing adjustment - discarding the CUP method - Held that:- Section 92-C(1) of the Act pertains to the determination of the arm's length price in relation to “an” international transaction. Section 92-F (ii) defines arm's length price to mean a price, which is applied or proposed to be applied in “a” transaction between persons other than associated enterprises, in uncontrolled conditions. If, for determination of the arm's leng .....

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iscard the CUP method, when the same had been applied by the assessee. For the remaining 03 international transactions also, the reasons so given are found by us to be vague and non-specific. - In the light of the observations made above, the TPO was required to give reasons for discarding the CUP method qua each of the transactions as all the 12 international transactions entered into by the appellant were distinct. The order of the TPO, having been found to be lacking as above, we find no .....

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herein the order of the Income Tax Appellate Tribunal, Delhi Bench-I, New Delhi (hereinafter referred to as - the Tribunal). The appeal pertains to the assessment year 2006-07 and through the same, the assessee seeks to raise the following substantial questions of law :- 1. Whether the Tribunal erred in law in remanding the issue relating to transfer pricing adjustment by holding that the TPO had not given any reasons for rejection of the CUP method which finding is perverse and contrary to the .....

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appearing on behalf of the appellant sought a favourable opinion from us as according to him, the Tribunal had erred in law by remanding the matter back to the Transfer Pricing Officer ( for short - the TPO) after holding that the TPO had not given any worthwhile reasons for discarding the Comparable Uncontrolled Price (CUP) method for determination of the arm's length price, the data for which had been supplied to him by the appellant-assessee. It was submitted on behalf of the appellant th .....

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determination of the arm's length price for these transactions at the hands of the TPO qua 12 of them, the appellant had applied both - the CUP method and Transactional Net Margin Method (TNMM). The details with regard to the afore-referred international transactions are tabulated below :- Sr. No. Nature of transaction Method used by Assessee Value of transaction received Value of transaction paid Method PLI 1. Purchase of Motorcycle, Scooter Parts, Consumables and other supplies TNMM OP/Sa .....

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13,309 11. Prototypic Development CUP/TNMM - 69,05,820 12. Reimbursement of expenses CUP/TNMM - 21,74,230 13. Warranty on scooters CUP/TNMM - 1,89,59,146 14. Recovery of expenses CUP/TNMM - 4,64,06,214 A perusal of the order passed by the TPO shows that for 09 of the afore-referred 12 transactions, for which the appellant-assessee had applied both - the CUP method and TNMM, no reasons have been given as to why the CUP method was being discarded for determining the arm's length price. Qua the .....

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NMM. When amongst others, both the above-referred methods are prescribed for determining the arm's length price and both have been applied by the assessee, then reasons as to why one over the other is being preferred, are required to be supplied by the TPO in the assessment order as the choice of one method over the other could work to the assessee's prejudice. Section 92-C(1) of the Act pertains to the determination of the arm's length price in relation to an international transacti .....

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methods is being preferred over the others. In the case in hand, as observed earlier, for 09 of the 12 international transactions, the order of the TPO is completely silent as to why for determining arm's length price qua them, he has preferred to discard the CUP method, when the same had been applied by the assessee. For the remaining 03 international transactions also, the reasons so given are found by us to be vague and non-specific. In the light of the observations made above, the TPO w .....

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