TMI Blog2017 (4) TMI 1527X X X X Extracts X X X X X X X X Extracts X X X X ..... lowance to 20%. When the assessee has not produced complete details and there is no basis of estimation of restricting the disallowance by the CIT (Appeals), we set aside this issue to the record of the AO for reconsideration and adjudication after verification and examination of the complete details to be filed by the assessee. Transfer Pricing Adjustment - TPO while computing the ALP has apparently taken the gross profit margin of the AMDL at entity level by assuming that the entire activity of AMDL is only trading in the medical equipments - HELD THAT:- In the case on hand, the international transactions in trading segment is confined only to the purchases made from the AE. Since there are other transactions of import and procurement from domestic market therefore the adjustment cannot be made by considering the entire trading segment of the assessee. Thus on principle, we do not find any error on these points however, the CIT (Appeals) has undertaken to recompute the margins of the comparable as well as assessee by considering the fresh material which was not available with the TPO/A.O. which it is not permissible to the CIT (Appeals) to do this exercise of recomputation w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis for allowing balance 80% of the amount. The CIT(A) ought to have appreciated that the assessee had not furnished even the basic details of commission paid during the assessment proceedings and therefore failed to prove this expenditure. 4. The CIT(A) erred in concluding that price charged by the assessee in its international transactions (other than royalty paid in the trading segment) entered into with its associated enterprises in the trading segment is at arm's length. 5. The CIT(A) erred in arriving at Gross Profit margin of Advanced Micronic Devices Ltd. at 16.01% on sales for the FY 2004-05 by including service charges and salaries wages as part of the cost of goods sold, when the same were not included in the case of the assessee. 6. The CIT(A) erred in not reducing the discount allowed by the Advanced Micronic Devices Ltd. from its sales while arriving at the Gross Margin of the comparable. 7. The CIT(A) erred in arriving at the Gross Profit margin of the Advanced Micronic Devices Ltd. as there should be consistency in arriving at gross margins between the assessee and the comparable companies while applying Resale Price Method. 8. The CIT(A) err ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r set aside by the Hon'ble High Court therefore the same is binding. Accordingly, by following the earlier order of this Tribunal, we do not find any reason to interfere with the impugned order of the CIT (Appeals) qua this issue. 6. Ground No.3 is regarding disallowance of commission expenses. 7. The Assessing Officer noted that the assessee has claimed the commission paid to the sales agents of ₹ 2,85,57,375. The assessee was asked to furnish the details of the commission debited to the profit and loss account and details of the payment made during the F.Y. relevant to the assessment year under consideration. The Assessing Officer found from the details filed by the assessee that the assessee has not furnished the names of the customers amounting to ₹ 2,42,33,641. Accordingly, the Assessing Officer has disallowed the said expenditure by holding that it has not been incurred wholly and exclusively for the purpose of business of the assessee. On appeal, the CIT (Appeals) has restricted the disallowance made by the Assessing Officer to 20% of ₹ 2,42,33,641 amounting to ₹ 48,46,728. 8. The learned Departmental Representative has contended that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ab System, etc from its AE being GE Medical Systems Group. The Assessing Officer noted that the assessee imports some equipments from other manufacturers and some items are procured from domestic market. However the assessee has not made any separate analysis for the purpose of determining the ALP for trading segment. The TPO was of the view that the MAM for arriving at ALP could be the Resale Price Method (RPM) for the trading segment. The TPO conducted a search of data base process and capitaline and could find only one company namely M/s. Advanced Micronic Devices Ltd. (AMDL) which is also in the business of trading medical devices equipments like implantable pace makers, operating D-5 etc. The TPO computed the gross profit of M/s. AMDL at 35% in comparison to the gross profit margin of the assessee in trading segment at 18.04% and accordingly proposed an adjustment under Section 92CA of the Act of ₹ 54,07,95,988. The assessee challenged the action of the Assessing Officer before the CIT (Appeals). The CIT (Appeals) has undertaken the exercise of recomputing and determining the ALP by obtaining the relevant financial details of AMDL. Accordingly, the CIT (Appeals) has dele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of purchases made from the AE and not on the entire transaction in the trading segment. There is no quarrel on this issue that the adjustment on account of transfer pricing can be made only in respect of the international transactions. In the case on hand, the international transactions in trading segment is confined only to the purchases made from the AE. Since there are other transactions of import and procurement from domestic market therefore the adjustment cannot be made by considering the entire trading segment of the assessee. Thus on principle, we do not find any error on these points however, the CIT (Appeals) has undertaken to recompute the margins of the comparable as well as assessee by considering the fresh material which was not available with the TPO/A.O. which it is not permissible to the CIT (Appeals) to do this exercise of recomputation without giving an opportunity to the TPO/A.O. The proper course of action on the part of CIT (Appeals) would have been to ask the TPO/A.O. for remand report by considering all the relevant material. However, the CIT (Appeals) did not choose to issue any remand order but undertaken the entire exercise on his own. Thus it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imilarly placed situation what an uncontrolled transaction would reflect. Accordingly it is directed. 7.4 This direction of the CIT (Appeals) has been confirmed by the Hon'ble ITAT in Page No.43, ITA No.810 to 812/(Bang)/2007 dt.16.05.2008. Since the issue during A.Y. 2005-06 is also the same, the A.O. is directed to follow the same directions of the CIT (Appeals) as held for A.Y. 2002-03 in the appellate order referred to above. The ld. AR has also submitted that in case no comparable is found to determine the ALP of royalty then in view of the decision of this Tribunal in the case of Toyota Kirloskar Motor (P) Ltd. Vs. ACIT 166 TTJ 189 the royalty payment should be clubbed with the other international transactions of the trading segment and the arm s length may be determined on the composite transaction of trading of medical equipment. 18. Since the issue was already set aside to the file of Assessing Officer for choosing the proper comparable therefore in view of the earlier order of this Tribunal, we set aside this issue to the record of the TPO/A.O. for reconsideration of the same in the light of directions of the Tribunal for the Assessment Years 2002-03 to 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
