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TMI Blog2019 (8) TMI 348X X X X Extracts X X X X X X X X Extracts X X X X ..... n of export of packaging material to the AEs and thereby erred in making a total addition of Rs. 77,33,52,433/- without appreciating that both these transactions entered into by the appellant company with its AEs were at Arm's Length Price (ALP) and hence, no addition was warranted at all. 3] The learned A.O / DRP erred in rejecting the aggregation approach followed by the appellant company for benchmarking all the international transactions relating to the packaging solution segment and thereby erred in separately benchmarking the international transactions of import of straws and export of packaging material and thereby erred in making a total addition of Rs. 77,33,52,433/-. 3.1] The learned DRP erred in not appreciating the that the various international transactions entered into by the appellant company with its AEs in the packaging solution segment were interrelated and accordingly, the appellant was justified in adopting the aggregation approach for benchmarking the said transactions and since the aggregation approach was also accepted by the learned DRP in the earlier years on the same facts, there was no reason to reject the same in this year and accordingly, the en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmits that in case, the ALP of the international transaction of export of packaging material is to be determined by applying internal TNMM, in that event, reliably and accurate adjustments for differences in functions and risks (such as difference in value chain, marketing function, credit risk, working capital, use of intangibles, etc. etc) ought to have been made. 6] Without prejudice to the appeal filed by the appellant against the order passed under section 143(3) of the Act for AY 2011-12 challenging the disallowance made u/s. 40(a)(i), the appellant submits that appropriate deduction ought to be allowed for the expenses disallowed in A.Y. 2011-12 while computing the income of the current assessment year in accordance with section 40(a)(i), since, the appellant has deposited the withholding tax on the said expenses during the current assessment year. 7] The Ld. AO has erred in initiating penalty proceedings under section 271 (1)(c) of the Act. 3. The issue raised in the present appeal is against transfer pricing adjustment made on account of import of straws from associated enterprises at Rs. 3,50,87,956/- and on account of export of packing material to associated enterp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which it was supposed to earn profits. The assessee was thus, instructed to benchmark its transactions pertaining to export of packaging material with the domestic segment of sales of packaging material using internal TNMM method as most appropriate method. The TPO also show caused the assessee as to why TP adjustment on similar ground as in assessment year 2012-13 be not adopted for the year under consideration also. From the reply submitted by assessee, the TPO noted that it had placed reliance on the submissions made in earlier year and no new grounds were submitted. After taking into consideration the submissions made by assessee, the TPO observed that aggregation approach needs to be rejected, following the approach applied in preceding assessment year. The TPO also noted that transactions under packing segment were entered into by assessee with different associated enterprises. In view of the said aspects, the assessee's approach of aggregating its transactions on the pretext that it was providing complete packaging material was not accepted by the TPO and arm's length price of international transactions was compared by adopting segmental approach. In the segment of exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material, (b) sale of packaging material, (c) import of capital equipment for filling purpose sale in domestic market and (d) import of straws. The learned Authorized Representative for the assessee pointed out that the issue with regard to packaging solutions division had arisen in several years before the Tribunal. In assessment year 2008-09, aggregate approach adopted by assessee under the aforesaid division was accepted by Revenue. However, in assessment year 2009-10, the Revenue authorities segregated the straws segment and capital segment and benchmarked them separately. Similar was the proposition in assessment years 2010-11 and 2011-12 and further in assessment year 2011-12, the finished goods were also benchmarked separately applying CUP method. In assessment year 2012-13, straws segment was benchmarked separately and finished goods under the products segment. The margins of domestic sales and the margins of associated enterprises were compared. However, no adjustment was made on account of capital goods. In assessment year 2013-14 i.e. the year under appeal, identical approach was applied. The learned Authorized Representative for the assessee pointed out that aggregation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at this issue of aggregation arose before the Tribunal in assessment year 2009-10 for the first time and the Tribunal in ITA No.359/PUN/2014 with cross appeal in ITA No.537/PUN/2014 vide order dated 20.09.2017 had held that aggregation approach needs to be applied. This was the issue raised by Revenue as DRP had allowed aggregation approach and the grounds of appeal raised by Revenue were thus, dismissed. 10. In assessment year 2010-11, the Tribunal further in ITA No.282/PUN/2015 with cross appeal in ITA No.412/PUN/2015, vide order dated 27.10.2017 also dismissed the appeal of Revenue on aggregation approach relying on the decision of Tribunal in assessment year 2009-10. 11. Further, the Tribunal in cross appeals in assessment year 2011-12 and appeal of assessee in assessment year 2012-13 in ITA Nos.635/PUN/2016, 665/PUN/2016 and 521/PUN/2017 vide order dated 23.03.2018 applied aggregation approach, which was accepted by the CIT(A) and the Revenue was in appeal. The second issue which was taken up by the Tribunal vide para 14 with regard to benchmarking of international transactions in export of packaging material segment. The TPO had applied CUP method for determining arm's ..... X X X X Extracts X X X X X X X X Extracts X X X X
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