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TMI Blog2016 (8) TMI 1431X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s.144C(5) of the Act dated 19.08.2011 of the Act pertaining to assessment year 2007-08. 2. The assessee has raised the following grounds for our consideration. 1. The order of the Transfer Pricing Officer (TPO) and Assistant Commissioner of Income Tax (ACIT) read with directions of the Dispute Resolution Panel (DRP) is contrary to law, facts and circumstances of the case. 2. Upward transfer pricing (TP) adjustment to international transaction of export of foot care products by the Appellant to Associated enterprise (AE). 2.1 The directions of the DRP, the consequential TP order and the final assessment order is erroneous in making an upward TP adjustment in relation to the international transaction viz., export of foot care products ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o to Section 92C(2) of the Act to the Appellant, while determining the arm's length price. 2.8 The TPO ought to have considered the provisions for arm's length range of +1- 5% variations as per the provisions of the Finance Act relevant to Assessment Year 2007-08. 2.9 The DRP/TPO erred in not providing any adjustments to the arm's length margin of Comparable Companies on account of differences in Research & Development and Marketing activities. 2.10 The DRP and TPO ought to have appreciated that TP is an anti-avoidance mechanism and when the Appellant is eligible for tax holiday benefits under section 1 OB of the Act, the DRP/TPO ought to have appreciated that the Appellant has no reason to shift/suppress its profit from its operation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessories pruchase 18140732 Sale of footcare products-fully packed 1063855036 After examining the TPO documentation and ratio of operating profit to the operating cost as Profit Level Indicator (PLI) and computed assessee's own PLI at page-6 of TPO's order, the TPO did not accept its computation of the PLI. TPO was of the view that the forex loss of Rs. 1,06,69,490/- and the financial charges Rs. 1610205/-, should not have been adjusted as both these were part of the operating cost. The TPO issued a notice on 24.06.2010 requiring the assessee to explain why the said adjustment should not be rejected. The TPO did not accept the assessee's reply and recomputed the assessee's PLI as under rejecting the adjustment of forex l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ost 108,26,83,081 5,17,85,843 113,44,68,924 Arm's Length Mark up on cost (5) : 5.64% Mark up on cost : Rs. 6,10,63,325.77 Income (Operating cost+Mark up) : Rs. 114,37,46,407(ALP) +5% of International transaction : Rs. 111,70,47,787 -5% of international transation : Rs. 101,06,62,284 The difference between the ALP computed by the TPO and the sale price shown by the assessee being more than 5% of the latter, the TPO concluded that the transactions had not been made at arm's length and an adjustment was required. Against the order of TPO, the assessee filed objections before the DRP. 3.2 The DRP after perusing the order of TPO and transfer pricing documents upheld the order of TPO in upward tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pulling out the same from the prowess data base. Therefore there cannot be any objection to the stand taken by the TPO. 6. We have heard both the parties and perused the material on record. In our opinion the Accounting year of the assessee and comparables are different. The TPO at liberty to recast the financial for the period involved in the assessee's case. Accordingly, we direct the TPO to recast the financial for the full period of 12 months covering the previous year 2006-07 relevant to the assessment year 2007-08 and thereafter compare with the assessee's case so as to correct ALP. This ground is remitted to the file of TPO for fresh consideration. 7. The next ground is regarding segmented data in the case of Ador Multi products a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o sub-section (2) if the variation between the arithmetical mean and the price at which such transaction has actually been undertaken exceeds five per cent. of the arith metical mean. In view of the retrospective operation of the aforesaid provision, the benefit of +/- five per cent as a standard deduction cannot be allowed. In other words, if the variation of arithmetic mean is within the range of +/-5%, , then the assessee is entitled for benefit of +/-5% under the proviso to Sec.92C(2) of the Act. The above view is fortified by the order of Delhi Tribunal in the case of ACIT Vs.UE Trade Corportion (India) Pvt Ltd., reported in (2011) 136 TTJ 297(Del.) Accordingly, we direct the TPO to allow +/-5% it, it is within the range of +/-5%. Orde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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