9911796707
TMI Blog2025 (1) TMI 1178X X X X Extracts X X X X X X X X Extracts X X X X ..... operating Income/expense in case of purchase of goods in foreign currency. (?) 2.1 The TPO/DRP-1/National e-Assessment Center erred on fact and in law in holding that the Foreign exchange gain pertaining to international transaction of purchase of books do not form part of the operating income and thus removing the amount of Rs. 39,93,000 from the operating income of the appellant. 3. Selection of comparables functionally non-comparable to the business activity of the appellant while computing arm's length price using the Transactional Net Margin Method. 3.1 The TPO/DRP-1/National e-Assessment Center erred on fact and in law in making the adjustment amounting to Rs. 59,07,000/- on account of international transaction for segment relating to books purchase from Macmillan Distributors Ltd.["MDL"] by rejecting the Transfer Pricing documentation of the appellant. The TPO/DRP-1/National e-Assessment Center erred in rejecting the comparables companies selected by the appellant on the ground of persistence losses despite such comparables are functionally most comparable to the business operations of the appellant. 3.2 That the DRP/National e-Assessment Center erred on fact an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et in Balance Sheet. (iii) Deemed international transactions by person other than AE in pursuance of a prior agreement (T.P. Risk Parameters). 5. Ld. AR of the assessee attended and submitted the relevant information as called for. 6. The assessee is engaged in the business of printing and publishing. The assessee has filed Form 3CEB along with return of income and it was observed that assessee had entered into international transactions with its Associated Enterprises (AE)/concerns during the year. Accordingly, the matter was referred to Transfer Pricing Officer (TPO). 7. A notice u/s 92CA (3) was issued to the assessee and in response, ld. AR of the assessee submitted the relevant information as called for. The assessee also submitted documentations prescribed under Rule 10D of the Income-tax Rules, 1962 (for short 'the Rules'). 8. The TPO observed that the assessee is primarily engaged in the business of publishing and trading of books and other related services. BDIPL distributes both UK and US Bloomsbury imprints which embraces a rigorous academic list focuses on business, fiction, non-fiction, children's academic, economics and management etc.. During the year, assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) G =D+F 28.27 (154.64) (126.37) Net Profit (Loss)/Turnover 1.79% (40.79%) (6.44%) 10. Based on the information submitted by the assessee, ld. TPO benchmarked the Class-VI transactions which is deemed international transactions and he observed that assessee has benchmarked OP/OR of 1.79% by selecting following comparables :- S.No. Company Name Weighted average 1. Westland Ltd. - 22.88% 2. Random House Publishers India Pvt. Ltd. - 61.0% 3. Leadstart Publishing Pvt. Ltd. - 5.26% 4. Nova Publications India Ltd. 1.45% 5. Vikram Publishers Pvt. Ltd. 3.66% 6. Harvard Business School Publishing India Pvt. Ltd. 6.45% 7. Informatics India Ltd. 24.87% 11. After considering the above comparables, ld. TPO rejected 5 comparables and retained only Harvard Business School Publishing India Pvt. Ltd. and Informatics India Ltd. selected by the assessee. The TPO proposed further 5 comparables and after considering the objections of the assessee, the TPO finally retained following comparables to benchmark the transactions. Accordingly, he determined the average OP/OR of 8.32% as under :- S.No. Company Name OP/OR 1. India Book Distri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at there are certain expenditure which are directly allocable to one segment but could not be so allocated due to defective allocation key. Now the assessee has prepared a more robust segmental accounts on the basis of actual sales undertaken in both the segments and directly allocatable expenditure have been allocated directly to that segments. It was further submitted that number of books sold in each segment provides an unblemished allocation of expenditure as it represents the efforts put in each segment. Accordingly, few expenditure has been allocated applying the ratio of no. of books sold in each segments. He further submitted that there are few expenditures, which have been allocated in the ratio of 50-50. This segmental account is more precise and uses lessor approximation, which offer a better clarity on the profitably from both the segments. 15.2 Ld. AR submitted that during the Transfer Pricing Proceedings the TPO computed the OP/OR of the assessee company at Rs. -11.66 lakhs from the segment of sale of traded books [Purchased from deemed AE] against the profit of 28.27 lakhs computed by the assessee after reducing the gain arising from foreign exchange. The TPO comput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom MDL and other distributors of BBPLC and the price charged from assessee for the goods purchased can be compared due to availability of third party comparable, thus for the transaction of purchase of books from MDL, considering the nature of the transaction, the discount offered by MDL to the assessee and the third party in India can be compared alternatively for applying the CUP method to be the most appropriate method to determine the ALP. 15.7 Ld. AR submitted that the assessee placed a detail of some of the invoices [sample basis] raised by AE along with the copies of the invoices on assessee and the third-party customers clearly demonstrating that the discount offered to the assessee is 70% of the print prices or more while the discount offered to third parties ranges between 45% to 65% and referred to Annexure 3. He further submitted that along with the copies of invoices on sample basis, screen shots of the various print prices of the titles appearing on the website of the BBPLC are also attached with the invoices. He brought to our notice that the Bench can verify the print prices of the titles sold by the AE to assessee and third party customers and the discounts offer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n'ble Gujarat High Court in the case of Pari Mangaldas Girdhardas vs. CIT (1977) CTR (Guj.) 647 and prayed that the additional evidences may be considered for adjudication. 17. Ld. AR submitted that the assessee has submitted additional evidences for the reason that in AY 2021-22, the assessee has submitted segmental report for the transactions involving purchases of books from MDIL having exactly similar transactions as in the present assessment year and the TPO has appreciated the above segmental reports and completed the assessment based on the available segmental report. Accordingly, due to non-availability of allocation key of ratios, the assessee could not allocate the expenditure and prepared the proper segmental report for the current assessment year and he submitted that the assessee has prepared segmental reports by applying proper keys and allocated the expenditure based on the segments. He prayed that the operations carried on by the assessee are exactly similar in the current assessment year and subsequent assessment years. The facts are identical and he prayed that the issue may be remitted back to the TPO/AO for verification of the same and benchmarked by adopting t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enses and the segmental report prepared by the assessee based on the accepted method of allocation in AY 2021-22 and also the details of discount offered by its AE and may be compared with the discount offered by the AE in the uncontrolled transactions and directed to compare the internal CUP available in this case to benchmark the transactions of purchase of books from its AE. Therefore, we direct the AO/TPO to benchmark the international transactions based on the additional evidences brought on record by the assessee as per law after giving proper opportunity of being heard to the assessee. Accordingly, ground no.3 raised by the assessee is allowed for statistical purposes. 21. With regard to ground no.4 relevant facts are, the Assessing Officer observed that sundry creditors outstanding shows that there is an enhancement in the trade payables/creditors amounting to Rs. 5,15,68,635/- from the preceding years. The assessee has not furnished any information or document on the abovesaid issue. He observed that there is a considerable increase in sundry creditors by 50%. The assessee was asked to explain the same and the assessee submitted that it has started its operation in India ..... X X X X Extracts X X X X X X X X Extracts X X X X
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