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TMI Blog2013 (5) TMI 938X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness of importing rough diamonds from outside India and exporting the same after processing and polishing the rough diamonds. The AO during the assessment proceedings noted that the assessee had purchased rough diamonds worth ₹ 15, 33,60,532/- from the AE situated in Belgium. The assessee had also sold polished diamonds worth ₹ 7, 25, 50,026/- to the AE at Belgium. Since the assessee had entered into international transactions with the AE the AO referred the matter to Transfer Pricing Officer (TPO) for determination of arms length price of the transaction with a view to make adjustment to the total income. The TPO did not recommend any adjustment in relation to the purchase of rough diamonds. He however, asked the assessee to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.80 Arithematic Mean 5.51 5.95 2.1 The TPO calculated the profit margin at the rate of 5.95% to the total operating cost of ₹ 44,98,98,908/- and thus computed the arms length value of sales. From the above sales the TPO deducted the non AE sales of ₹ 39,24,10,997/- to arrive at ALP of AE sales at ₹ 8,42,56,896. Thereafter allowing the benefit of +/- 5% range, the TPO computed the TP adjustment at ₹ 1,17,06,870/- in relation to the AE sales of ₹ 7,25,50,026/-. The AO accordingly added the above amount to the total income. 3. In appeal, CIT(A) after detailed examination and after hearing the assessee upheld only 3 comparables i.e. Laser Diamond, Adesh International Pvt. Ltd and Goenka Diamond which gave ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in case adjustment was computed only with respect to operating cost of the AE sales no addition could be made if PLI of 5.95% as taken by the TPO or PLI of 6.28% as taken by CIT(A) was adopted. 4.1 Learned CIT(DR) on the other hand submitted that in view of the decision of special bench of Tribunal in case of M/s IHG IT Services (India) Pvt. Ltd. Vs. ITO in ITA no. 5890/Del/2010 and the retrospective amendment made to the second proviso to section 92 C (2) by the Finance Act 2012 the benefit of +/- 5% can be allowed only when the variation between arms length price and the price at which the international transaction has actually been undertaken does not exceed 5%. The learned DR expressed no objection to the adjustment made only in relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equired to be computed by reducing the profit element at the rate of 3.35% declared by the assessee and to the said operating cost, PLI of 6.28% has to be applied to get arms length price of AE sales. In view of the amendment to Proviso of section 92 C (2) by the Finance Act 2012 with retrospective, benefit of standard deviation of +/- 5% can be allowed only when the variation between the arms length price as determined and the price at which the international transaction had actually been undertaken does not exceed +/-5% margin. In our view, The TP adjustment is required to be recomputed in the light of observations made in this order. We, therefore, set aside the order of CIT (A) and restore the matter to the file of AO/TPO for fresh orde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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