TMI Blog2020 (3) TMI 603X X X X Extracts X X X X X X X X Extracts X X X X ..... ained documents / books of account as required under the statute. It is also evident, in the course of proceedings before the Transfer Pricing Officer, the assessee has made substantial compliance by furnishing transfer pricing study report as well as many other documents. What the assessee has failed to furnish is, the segmental profitability of the AE and non AE transactions. The inability to furnish the aforesaid details was also well explained by the assessee before the Transfer Pricing Officer and learned Commissioner (Appeals) by demonstrating the practical difficulty in maintaining those details considering the nature of business carried on. Though, the Transfer Pricing Officer has alleged that non furnishing of segmental profitab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... getting them cut polished and thereafter exporting to various parties outside the Country including the Associated Enterprises (AEs) of the assessee situated abroad. In the transfer pricing study report, the assessee benchmarked the international transaction with the AEs relating to sale of polished diamond amounting to ₹ 27,65,09,328, adopting Transactional Net Margin Method (TNMM) as the most appropriate method with operating profit / sales as the profit level indicator (PLI). Since, the margin shown by the assessee @ 2.70% is within the tolerance range of the average margin of the comparables worked out @ 5.54%, the transaction with the AE was claimed to be at arm's length. 3. After perusing the transfer pricing study repo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a polished diamond. Therefore, it is very difficult for the assessee to identify each rough diamond piece wise and equally difficult to identify each cut and polished diamond vis a vis the original rough diamond from which it was cut and polished. He observed, though, the Transfer Pricing Officer called for the segment wise Profit Loss account in respect of exported as well as all the diamond, however, ultimately, he accepted the arm s length price declared by the assessee. The learned Commissioner (Appeals) observed, the Transfer Pricing Officer could have worked out the gross profit and net profit by averaging the purchase price and the expenditure in proportion of export sales of each one of the segments which he did not do. Thus, aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Navinchandra Exports Pvt. Ltd., R Tax Appeal no.788/2018, dated 9th July 2018 (Guj.); and ii) DCIT v/s Ankit Gems Pvt. Ltd., [2019] 106 taxmann.com 243 (Mum.). 7. We have considered rival submissions in the light of the decisions relied upon and perused the material on record. The material on record makes it clear that the assessee has maintained primary books of account / documents in respect of its business activity. The fact that the documents relating to transaction with the AE have also been maintained by the assessee is evident from the transfer pricing study report, wherein, the transaction with the AE has been benchmarked under TNMM. This shows that the assessee has maintained documents / books of account as required under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and perused material on record. We have also applied our mind to the decisions relied upon. On a careful reading of the penalty order passed under section 271G of the Act, it is evident, the Transfer Pricing Officer has proceeded to impose penalty under the aforesaid provision alleging that the assessee has failed to furnish certain information/documents which prevented him from determining the arm's length price properly. However, on a perusal of the orders passed by the Departmental Authorities as well as the material placed on record, it is noticed that the assessee has maintained books of account and other information to benchmark the international transaction with AE by applying TNMM and the transfer pricing study report containing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n record clearly indicate that the assessee indeed has maintained a number of information/documents as required under the statutory provisions. Further, the assessee has also explained why it is not possible to furnish certain information sought by the Transfer Pricing Officer qua applicability of CUP method. In this regard, detailed written submission has been filed by the assessee before the Transfer Pricing Officer which has been properly evaluated by the learned Commissioner (Appeals) and the difficulty in maintaining the information sought by the Transfer Pricing Officer has been well explained and analysed. It is also necessary to observe, ultimately the Transfer Pricing Officer had accepted the benchmarking done by the assessee under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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