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TMI Blog2018 (12) TMI 1868X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case. 2. The Learned Commissioner of Income-tax (Appeals)- IT/TP has erred on facts and in law, in deleting the Transfer Pricing adjustment without appreciating the fact that the assessee has bifurcated its trading activity into domestic sale and export sale, but has chosen same set of the comparable companies by following the same strategy in the economic analysis of the Transfer Pricing study report. 3. The Learned Commissioner of Income-tax (Appeals)- IT/TP has erred on facts and in law in accepting the contention of the assessee that the assessee is engaged in the manufacturing activity, when no such details were submitted in TP proceedings. 4. For this and such other reasons as may be urged at the time of he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the transactions under the domestic sales and export sales, TNMM method was selected as most appropriate method. The operating profit to operating sales ratio and operating profit to operating cost ratio were taken as PLI in the TNMM analysis, respectively. In case of domestic sales, PLI of assessee was arrived at 4.45%, whereas average PLI of comparables arrived at 8.80%; in the case of export sales, PLI of assessee was 2.86%, whereas the average PLI of comparables was 8.30%. The assessee had selected two companies as comparables on the basis of search conducted. The Assessing Officer was of the view that there was no logic for bifurcating the trading activity into domestic sales and export sales. He proposed to aggregate and benchmark a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... domestic sales and export sales; whereas the case of assessee was that apart from trading of components, it was also engaged in the export of finished goods. The assessee furnished manufacturing process chart before the CIT(A) and various other evidences which were confronted to the TPO, who after examining the additional evidence, had accepted that the assessee company was engaged in manufacturing and trading activity. The Tribunal after taking into consideration all the evidences including additional evidence observed that manufacturing activity was being carried out by the assessee. 10. The learned Authorized Representative for the assessee pointed out that the adjustment has been made in the hands of assessee on the ground that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to the second step, wherein it is the duty of Assessing Officer / TPO to benchmark two activities separately. Accordingly, we direct the Assessing Officer / TPO to apply TNMM method and go through the comparables selected by assessee and determine the arm's length price of international transactions entered into by assessee with its associated enterprises under the umbrella of manufacturing activity and also as part of trading activities. The two activities have to be benchmarked separately and independently, for which reasonable opportunity of hearing shall be provided to the assessee. Accordingly, we remit the issue back to the file of Assessing Officer / TPO in this regard. The grounds of appeal raised by Revenue are thus, allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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