TMI Blog2019 (2) TMI 714X X X X Extracts X X X X X X X X Extracts X X X X ..... be applied in this regard. The assessee has earned margins of 7.76%. The assessee had also furnished details and had selected certain comparables as functionally comparable whose mean margins worked out to 7.12%. TPO has not considered the said plea of assessee. So, in all fairness, we direct the AO / TPO to apply TNMM method to benchmark the international transactions of assessee and compare the margins shown by assessee with the mean margins of comparables which are functionally comparable. In this regard, the matter is being set aside to the file of AO / TPO for limited purpose to verify the stand of assessee and to determine arm's length price of international transactions. The grounds of appeal raised by assessee are thus, allowed. - ITA No.994/PUN/2016 - - - Dated:- 12-2-2019 - Ms. Sushma Chowla, JM And Shri D. Karunakara Rao, AM For the Appellant : Shri Rajendra Agiwal For the Respondent : Shri S.B. Prasad, CIT ORDER PER SUSHMA CHOWLA, JM: The appeal filed by assessee is against order of DCIT, Circle-8, Pune, dated 29.01.2016 relating to assessment year 2011-12 passed under section 143(3) r.w.s. 144C(13) of the Income-tax Act, 1961 (in short th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,593/-. The assessee has raised several grounds of appeal, but all relate to the aforesaid addition. 4. Briefly, in the facts of the case, the assessee for the year under consideration was engaged in the manufacturing of Automotive Fasteners and Connectors. The assessee was part of group based in France. The assessee had entered into international transactions with its associated enterprises and hence, reference was made under section 92CA(1) of the Act to the Transfer Pricing Officer (TPO). The TPO noted the assessee to have sold finished goods value of ₹ 3.70 crores to its associated enterprises and claimed it to be at arm's length price on the basis of Cost Plus Method. In support, the assessee relied on OECD Guidelines and also pointed out that as no internal CUP method could be identified, Cost Plus Method was the most appropriate method. The assessee was asked to submit the details of finished goods sold to associated enterprises and also to third parties. The TPO on analysis noted that there were products / components which were sold to associated enterprises as well as to third parties and there was huge price difference between the sale price made to third pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st and after manufacturing the items, the same were sold to associated enterprises. The learned Authorized Representative for the assessee pointed out that difference in price of items sold to third party and associated enterprises was because of commercial prudence and also there was material cost difference because of imports of raw material and also volume difference wherein the items sold to associated enterprise totaled ₹ 65,25,006/-. The learned Authorized Representative for the assessee pointed out that the TPO had accepted 76% of transactions and the issue was only with respect to item Nos.1 to 6 as mentioned in the chart, though the item Nos.7 to 9 wherein no adjustment was made, sale was made both to associated enterprises and non-associated enterprises. He stressed that CUP method was not applicable to the facts of the case and CPM is to be applied. He also pointed out that when no adjustment could be granted, then that method cannot be applied. In this regard, he placed reliance on the ratio laid down by the Hon ble Bombay High Court in Pr.CIT Vs. M/s. Amphenol Interconnect India P. Ltd. in Income Tax Appeal No.1131 of 2015 along with other appeals, judgment dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of cost and after manufacturing items were sold to associated enterprise; first of all difference in volume of goods sold to associated enterprise as compared to non associated enterprise. Further, the assessee has pointed out that it acted as contract manufacturer in respect of components sold to associated enterprise and did not undertake any marketing functions for the said exports; did not bear any credit risk; did not pay any royalty to associated enterprise for use of technology and knowhow in production process, while manufacturing goods for associated enterprises. Hence, difference in functions performed, assets employed and risk assumed by the assessee under the activity of sale of manufactured items to the associated enterprise and non associated enterprise. Further, admittedly, there were geographical differences in markets, wherein the assessee was exporting components to associated enterprises located in France, whereas the components sold in non associated enterprises were in India. 9. The next aspect of the issue is whether the price agreed between the parties based on import and sale contractual terms could be compared with price agreed based on manufacture a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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