9911796707
TMI Blog2023 (3) TMI 968X X X X Extracts X X X X X X X X Extracts X X X X ..... a) Transfer Pricing adjustment made in respect of purchase of capital goods from Associated Enterprise (AE). (b) Transfer pricing adjustment made in respect of purchase of finished goods from Associated Enterprise (AE). (c) Disallowance of claim of amortization of premium paid for leasehold land. (d) Disallowance of depreciation on additions to fixed assets made during the period relevant to AY 2006-07. (e) Computation of Book profits u/s 115JB of the Act by making additions mentioned in (c) and (d) above. 2. The assessee is a joint venture company between M/s Owens Corning Corporation USA and M/s Mahindra and Mahindra India Ltd, India. The former holds 81.50% of share capital and the later owns 21.50% of share capital. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not accept the TP study as well as the alternative contentions of the assessee. He chose to consider AE as tested party. Accordingly, the TPO identified 12 comparable Indian companies who are providing marketing support services in India and the average mean margin of those 12 companies worked out to 9.16%. Accordingly, the TPO took the view that the maximum rate of mark-up that could have been charged by the AE should not exceed 9.16%. Accordingly, he made transfer pricing adjustment of Rs.32,44,165/-. The Ld DRP, in principle, confirmed the order of TPO. Since the assessee has submitted that there are mistakes in the computation made by the TPO, it directed the AO/TPO to correct those mistakes. After correction of mistakes, the TP ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered with non- AEs may be relevant, since the AE has been selected as Tested party. However, we leave this matter open to the wisdom of assessee and the TPO. Accordingly, we restore this issue to the file of TPO/AO for bench marking the purchase of capital goods afresh, in accordance with law. 4. The next issue relates to the transfer pricing adjustment made in respect of purchase of finished goods. The assessee has purchased finished goods from its AE to the tune of Rs.6.91 crores for sale to its customers in India. The assessee adopted Resale Price Method (RPM) as most appropriate method and Gross Profit to Sales as Profit level indicator (PLI). The assessee had declared gross profit loss of 1.30%. It had selected 8 companies and based o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e determining the ALP of the purchases made from AEs. 4.3 The Ld D.R submitted that the concept of "business strategy" cannot be applied in transfer pricing provisions. He submitted that the assessee has not furnished segmental results of AE and non-AE transactions, even though it was asked for by the TPO. He further submitted that the assessee has made profits in the earlier years. He also submitted that the majority of functions have been done by the assessee and not by the AE. 4.4 The ld A.R, in the rejoinder, submitted that the assessee is having profits from its manufacturing activity. The assessee has suffered loss in the trading activity as a business strategy in order to maintain its business share and profitability in the manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this issue and restore the same to the file of AO/TPO for determining ALP of purchase of finished goods by adopting most appropriate method. We also make it clear that the transfer pricing adjustment, if any, should be restricted to the purchases made from AE only. The assessee is also directed to furnish all the relevant details before the AO/TPO. 5. The next issue relates to the disallowance of claim of amortization amount premium paid on lease hold land. The Ld A.R submitted that this issue has been decided against the assessee in the earlier years by the Tribunal. He further submitted that the assessee has challenged the decision rendered by the Tribunal by filing appeal before the Hon'ble High Court of Bombay for AY 2004-05 and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue may be restored to the file of AO. 6.1 We heard Ld D.R and perused the record. We find merit in the submissions made by Ld A.R. We notice that the AO had disallowed depreciation claim initially in AY 2006-07 and the disallowance made in this year is consequential to the same. Since the Tribunal has restored the matter relating to disallowance of depreciation made in AY 2006-07 to the file of AO for re-examination, it would be proper for us to restore this issue to the file of the assessing officer for examining it afresh in the light of decision taken by him in AY 2006-07 in the set aside proceedings. Accordingly, we restore this issue to the file of AO. 7. The last issue relates to the computation of book profit u/s 115JB of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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