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TMI Blog2023 (7) TMI 746X X X X Extracts X X X X X X X X Extracts X X X X ..... ) & 142(1) were issued and served on the assessee. The Ld. AO observed that the assessaee has entered into large international transactions with Associated Enterprises [AEs] and thereafter made a reference to the Ld. Transfer Pricing Officer [TPO] for determining the Arm's Length Price [ALP] U/s. 92CA of the Act. Accordingly, the Additional Director of Income Tax (Transfer Pricing) passed an order vide DIN & Order No. ITBA/TPO/F/92CA3/2020-21/1030178955(1) dated 29/01/2021. While passing the order U/s. 92CA(3) of the Act, the Ld. TPO observed that as per 3CEB report, the following international transactions entered into by the assessee with its AEs: Sl No Associated Enterprises Nature of International Transaction Total amount paid / received or payable / receivable in the transaction Method 1. Alliance One International AG Switzerland tobacco and its byproducts on FOB basis Sale of unmanufactured 174,45,58,168 TNMM 2. Alliance one International AG, Switzerland Sale of unmanufactured tobacco and its byproducts on CIF basis 13,12,79,824 TNMM 3. Alliance one International Inc, USA Sale of unmanufactured tobacco and its byproducts on FOB basis 10,32,13,440 TNMM 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ier Tobacco Packers Pvt Ltd 177.77 158.01 19.76 12.50 11.11 22.39 20.11 Arithmetic Mean 11.19 10.05 8. The Ld. TPO therefore made an upward adjustment of Rs. 14,41,14,891/- to the returned income of the assessee. Accordingly, the draft assessment order U/s. 144C(1) of the Act was passed on 24/03/2021 by the Ld. AO. Against the draft order, the assessee filed its objections before the Ld. Dispute Resolution Panel [DRP]. The Ld. DRP considering the submissions made by the assessee, gave certain directions to the Ld. TPO on 22/12/2021. Considering the directions given by the Ld. DRP, the Ld. TPO vide its order dated 25/01/2022 revised the TP adjustment to Rs. 13,76,30,449/-. The Ld. AO based on the Ld. TPO's order, passed the final assessment order by adding Rs. 13,76,30,449/- to the returned income of the assessee on account of adjustment to the ALP. Aggrieved by the final assessment order of the Ld. AO, the assessee is in appeal before the Tribunal. 9. The assessee has raised the following grounds of appeal: "1. The Ld. DRP and the Ld. AO / the Ld. TPO erred in law and on facts in making TP adjustm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther submitted that BVPL is not engaged in the manufacturing activity and also in threshing and redrying of the unmanufactured tobacco. The Ld. AR vehemently argued that the assessee is engaged in the export of unmanufactured tobacco by carrying out the activities of threshing and redrying. The Ld. AR also submitted in his written submissions stating that the level of fixed assets (plant & machinery) as a percentage of total sales is 34.39% for the assessee whereas it is 2.31% in the case of BVPL. The Ld. AR therefore argued that the comparable viz., BVPL failed in the Functions, Assets and Risks [FAR] analysis and therefore it should not be included as a comparable for the computation of ALP. The Ld. AR further submitted that the company's FAR analysis has not changed from the AY 2009-10 and therefore submitted that on the basis of principles of consistency, BVPL should be excluded as a comparable. In this connection, the Ld. AR placed reliance on the Hon'ble Supreme Court in the judgment of Radhasoami Satsang vs. CIT [1992] 193 ITR 321 (SC). Further, with reference to exclusion of DTE Exports Pvt Ltd., by the Ld. TPO and the Ld. DRP that the exports of the company is only 3.47% w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form of Plant & Machinery is Rs. 68,67,22,223/- whereas the comparable viz., BVPL selected the Ld. TPO has employed Assets in the form of Plant & Machinery for Rs. 55,20,109/-. We are therefore of the considered view that based on one of the parameters of FAR analysis ie., Assets employed, we hold that the comparable BVPL could not be a good comparable with that of the assessee company. Hence, the Ld. TPO / Ld. AO is directed to exclude the entity BVPL from the final set of comparables while reworking the international transactions. 13. With respect to DTE Exports Pvt Ltd., we find that the exports constitute only 3.74% of the total turnover and therefore the Ld. TPO / Ld. DRP considered the insignificant exports of DTE Exports Pvt Ltd., and rejected it as a comparable. However, the Ld. DRP has considered the inclusion of Premier Tobacco Packers Private Limited which does not have any export turnover. We find that the Ld. TPO has not applied filter of minimum of 50% should be from exports turnover in the case of Premier Tobacco Packers Private Limited. While observing the inconsistency in the comparables selected by the Ld. TPO wherein Ld. DRP also affirmed the selection of Premi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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