TMI Blog2023 (3) TMI 968X X X X Extracts X X X X X X X X Extracts X X X X ..... aw. TP adjustment made in respect of purchase of finished goods - AR contended that internal CUP is the most appropriate method - HELD THAT:- When the assessee has purchased finished goods from both AEs and Non-AEs, there is merit in the contentions of Ld A.R that internal CUP may be most appropriate method. Accordingly, we are of the view that this issue also requires fresh examination at the end of TPO/AO. Accordingly, we set aside the order passed by AO on 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. Disallowance of claim of amortization amount premium paid on lease hold land - HELD THAT:- Having regard to the submissions made by Ld A.R and the Form No.8 filed by the assessee, we restore this issue to the file of AO with the direction to follow the decision that may be rendered by Hon ble Bombay High Court on an identical issue urged by the assessee before it in AY ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase of capital goods and purchase of finished goods from its Associated Enterprises (AE). 3. The first issue relates to the transfer pricing adjustment made in respect of purchase of capital goods from its AEs. It is noticed that the assessee has purchased capital goods valued 2.99 crores from its AE. The assessee has claimed depreciation thereon. The assessee has purchased multiple items of capital goods of smaller values from its AE. The assessee bench marked the above said transaction under TNM Method under its manufacturing segment. With regard to manufacturing segment, the assessee identified 11 comparable companies, whose average margin was 7.09%, while the operating margin earned by the assessee from its manufacturing segment was 16.62%. Hence the assessee claimed that the purchase of capital goods from its AEs is at arms length. 3.1 The Transfer Pricing Officer (TPO) did not accept the transfer pricing study conducted by the assessee. The TPO noticed that the AE has purchased goods and supplied them to the assessee by charging mark-up of 20% of the supplies. In this regard, it was submitted that the AE has charged similar mark-up to the supplies made to other As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 on multiple years (3 years) data and accordingly, the weighted average margin was worked out at 9.55%. However, the assessee defended its margin stating that it was a business strategy adopted by it to retain its customers and boost sale of manufactured goods. 4.1 The TPO did not accept the contentions of the assessee. He also rejected multiple year data adopted by the assessee. Accordingly, the TPO computed average margin of 8 comparable companies selected by the assessee by adopting single year data, which w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hence, we are of the view that an opportunity may be provided to the assessee. Before us, the Ld A.R also contended that internal CUP is the most appropriate method. 4.6 We notice that the assessee has adopted Resale Price Method as most appropriate method in its Transfer pricing study. We are concerned herewith the ALP of purchase of finished goods. In that case, the fact whether those finished goods have been sold at loss or profit is really not relevant for determining ALP of purchase price of finished goods. When the assessee has purchased finished goods from both AEs and Non-AEs, there is merit in the contentions of Ld A.R that internal CUP may be most appropriate method. Accordingly, we are of the view that this issue also requires fresh examination at the end of TPO/AO. Accordingly, we set aside the order passed by AO on 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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