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TMI Blog2015 (9) TMI 1701X X X X Extracts X X X X X X X X Extracts X X X X ..... the TPO for determination of the ALP u/s 92CA of the I.T. Act. The TPO observed the following financial results as reported by the assessee for financial year 2008-09: Item Amount (in Rs.) Operating Revenue 788551816 Operating Cost 868833170 Operating Profit -80281354 OP/OR -10.18% OP/OC -9.24% 3. He further observed the following international transactions: Rs. 55,77,18,979 purchase of medical devices Rs. 1,39,61,075 purchase of programmers for own use Rs. 1,50,809 purchase of marketing material Rs. 4,17,060 sale of medical devices Therefore, the TPO proceeded to consider the FAR analysis done by the assessee. He observed that in its T.P. study, the assessee has adopted 'resale price method' for determination of the ALP and has adopted 4 companies as comparable companies. The TPO, however, held that the resale price method can be used only in a situation where the products are closely comparable. He, therefore, issued a show cause notice dated 2.11.2012 to the assessee asking for its explanation as to why TNNM method may not be selected as the most appropriate method in place of RPM. Assessee filed its reply dated 20.11.2012 stating that (i) the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which assessee preferred objections before the DRP raising an objection that the RPM is the most appropriate method in the circumstances of the case of the assessee. DRP, however, upheld the findings of the TPO incorporated in the draft assessment order. Thereafter, AO passed final assessment order against which assessee is in appeal before us. 4. The learned Counsel for the assessee Shri R. Vijayaraghavan submitted that in the case of the assessee where the assessee is purchasing products from its AEs and is selling the same to non related parties in India, the most appropriate method to be adopted is the resale price method. He submitted that the assessee in its TP study has adopted 4 companies as comparable to the assessee, whose average gross margin was computed at 26.49%, whereas the assessee has shown gross margin at 26.64% of the sales and therefore, the margin of the assessee was treated by the assessee to be at ALP. He submitted that though the assessee has made detailed submissions before the TPO as to why RPM, is the most appropriate method, the TPO except reproducing the parameters to be taken into consideration for applying the RPM, has not stated as to how the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parameters to be taken into consideration for adopting the RPM for comparability analysis, but except stating that the RPM method can be adopted only where the products are closely comparable, he has not given detailed reasoning as to why the said method is not applicable to the assessee. We find that the TPO has not brought on record any evidence as to how the products sold by the comparable companies are not similar to the products sold by the assessee herein. When the TPO desires to reject the method consistently being followed by the assessee and desires to adopt a different method, the TPO is required to give his reasoning which is absent in the case before us. Therefore, we deem it fit and proper to remand the issue to the file of the TPO for determination of the most appropriate method for determination of the ALP. Further we direct that if the TPO holds that the RPM is to be adopted as the most appropriate method, then the TPO shall also take into consideration the comparable companies selected by the assessee in addition to the companies selected by him for determination of the ALP. 7. In the result, Ground No.2 filed by the assessee is treated as allowed for statistical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of section 194C and made the consequential disallowances u/s 40(a)(ia) of the Act. 11. Having regard to the rival contentions and the material on record, we find that the assessee's contribution towards sponsorship also includes advertisement and therefore, the AO and the DRP have held that the provisions of section 194C are applicable. The Revenue is guided by the CBDT Circular No.715, dated 8.8.1995 for holding so. On perusal of the said circular, we find that vide above circular, CBDT has issued clarifications on various provisions relating to Tax deductions at source regarding changes introduced through Finance Act, 1995. In the said circular, Q.No.1, 18 and 19 are relevant to the facts of the case before us. Therefore, for the sake of ready reference, the said questions and answers are reproduced herewith: "Question 1 : What would be the scope of an advertising contract for the purpose of section 194C of the Act? Answer : The term 'advertising' has not been defined in the Act. During the course of the consideration of the Finance Bill, 1995, the Finance Minister clarified on the Floor of the House that the amended provisions of tax deduction at source would appl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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