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TMI Blog2017 (4) TMI 186X X X X Extracts X X X X X X X X Extracts X X X X ..... cing Officer's arm's length price (ALP) determination-rejected the assessee's claim that the transactional net margin method (TNMM) was applicable and rather imposed the comparable uncontrolled price (CUP) method under section 92CA of the Income-tax Act, 1961. The assessee did not appeal as apparently it had consistently incurred losses. The difference in method led to rejection of losses of about Rs. 3 crores. The Assessing Officer initiated penalty proceedings premised upon the understanding that an adverse order under section 92C attracted the Seventh Explanation to section 271(1)(c). After discussing the submissions he was of the opinion that the explanation offered by the assessee was not satisfactory and did not display go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Rs. 3.14 crore. The 'specified business' of GSC with Maruti Suzuki Ltd. was transferred to the assessee with all business activities, transactions, contracts, orders, inquiries and the consultancy services in relation to the transition of such business. In addition to that, GSC also agreed to provide all technical information, know-how, data, formulae and knowledge relating to the products manufactured and sold to Maruti Suzuki, which stood transferred to the assessee by means of this agreement. It appears that the Transfer Pricing Officer misdirected himself in evaluating the international transaction of payment of Rs. 3.15 crore to GSC as a mere rendering of services alone in disregard to the fact that this payment was mainl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and desired to receive certain engineering services through the employees of its associated enterprises. This demonstrates that whereas consideration of Rs. 3.14 crore was mainly for acquiring 'business' of supply of goods to Maruti Suzuki, for which it was to set up its own plant and the second amount of Rs. 13.03 lakhs was paid for availing the engineering services in installing such plant and machinery. The third international transaction is payment of a small amount of Rs. 3.91 lakhs paid to the associated enterprises for availing management support services. These services were received pursuant to an agreement with Prime Polymer Co. Ltd., Japan, a copy of which is available at page 569 of the paper book. The services provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, the details of which were disclosed to the Transfer Pricing Officer by a letter. This according to the Income-tax Appellate Tribunal was sufficient elaboration of the nature of services availed of under the three international transactions which were improperly dealt with by the Transfer Pricing Officer and consequently the Assessing Officer. The Tribunal thereafter took note of the decisions of the Punjab and Haryana High Court in Knorr-Bremse India P. Ltd. v. Asst. CIT [2016] 380 ITR 307 (P&H) and then observed as follows : "The only question is whether the transaction was entered into bona fide or not or whether it was sham and only for the purpose of diverting the profits. Reverting to the facts of the extant case, we have found o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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