TMI Blog2024 (4) TMI 253X X X X Extracts X X X X X X X X Extracts X X X X ..... e also do not decide ground number A of the appeal of the AO whether in such case what should be the most appropriate method as the method adopted by the learned transfer pricing officer of transactional net margin method has been upheld for deleting the addition by the learned CIT A. While computing the arm's-length price adopting the transactional net margin method, nine comparables were selected whose average PLI of operating profit/sales was 5.41% and the assessee's margin was 6.12%, the addition was deleted. DR objection is that the comparable is introduced by the assessee before theCIT A where in some of the cases very low margin of 1% and 2% is shown and therefore such low margin entities could not have been selected. However, he could not show that those entities are functionally not comparable with the assessee. May be in the comparability analysis some of the companies may have a lower margin but those have to be included in the comparability analysis if they are functionally comparable with the functions of the assessee. No infirmity in the order of the CIT A in deleting the addition of adjustment in arm's-length price of international transaction - Decided i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Ltd, which were introduced by the assessee as per the updated data as on 31/03/2012 at the appellate stage (as mentioned in Para 7.11 of order of CIT(A) under consideration) (i) without offering any opportunity to the TPO to submit his comments and fulfillment of filters as applied by TPO during Transfer pricing audit and ii) Without giving detailed reasons for accepting the fresh comparables submitted by the assessee during appellate proceedings. 2) The Ld. CIT (A) erred on facts and in law in accepting the new search data introduced by the assessee, ignoring the decision of Chennai ITAT in the case of SL Lumax Ltd. [2012] 22 taxmann.com 15 (Chennai) whereby it has been held that assessee cannot be allowed to bring in a new set of comparables, for if allowed, it will result in an unending exercise since endeavour of all assessee s would be to bring the ALP within comparable range. 3) The Ld. CIT (A) erred on facts and in law in introducing certain fresh/new comparables of the assessee in her final working, viz. S. Kumar Co. (Traders) Pvt. Ltd., Santowin Corporation Ltd., Vijay Silk House Mumbai Ltd., Visagar Polytex. Ltd., without discussing the functional comparability. (C) Rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but claim it as a reimbursement and adopted Comparable Uncontrolled Price (CUP) method to say that it is at Arm s Length. 06. With respect to the import of goods, the learned Transfer Pricing Officer rejected resale price method as most appropriate method, stating that the assessee is performing the marketing and distribution functions with great intensity whereas the comparable selected by the assessee are not performing the same in the same intensity. The learned TPO noted that assessee has incurred advertisement and sales promotion expenses of ₹ 117,405,335/ out of which it has got a reimbursement of ₹ 77,347,207 from its associated enterprises and debited the net amount of ₹ 40,058,128 in the profit and loss account. Therefore, the learned transfer-pricing officer asked that whether the comparable companies selected by the assessee were also performing the advertisement marketing and distribution expenses with the same intensity. On analysis of the details submitted by the assessee, the learned transfer pricing officer found that except only two comparables, all other three comparable selected are having either very low marketing expenses or the companies are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... priate method in subsequent years and transfer pricing officer has also accepted the assessee is arm's-length price and no adjustment were made. He further found that the benchmarking under transactional net margin method was made by selecting the nine companies. He also rejected the finding of the learned transfer-pricing officer that the assessee has AMP to sales ratio of 12.16% and the comparable company with a very low AMP to sales ratio of less than 3% should not be selected. He held that in the transactional net margin method the net profit indicator is less affected by the transactional difference. He further noted that the AMP to sales ratio in assessee's case is also 4.14% after reimbursement. Therefore, he rejected the filter adopted by the TPO of AMP/sales while applying transactional net margin method and selection of comparable. Accordingly, he found nine comparable companies whose average margin was 5.41% and the margin of the assessee was 6.12% and therefore as the operating margin of the assessee is better than the average comparable companies' margin and therefore he deleted the adjustment made by the learned TPO. 010. Aggrieved, the learned AO is in ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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