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2014 (11) TMI 883 - AT - Income TaxDetermination of Profit Level Indicator (PLI) - Whether Return on Capital Employed (RoCE) is correct PLI under the facts and circumstances of the case Held that - There is commonality of the transaction with AE and Non-AEs and due to such commonality it is not practical to compute separate capital employed or profitability in respect of transactions with AEs - Following the decision in Gold Star Jewellery Design Pvt. Ltd. vs. ITO 2014 (11) TMI 904 - ITAT MUMBAI - as per computation made by the assessee which is based on the figures given in TPOs order the arithmetical margin of comparable will be 8.60% and assessee s margin on the basis of OP/TC will be 10.63% and as the PLI of the assessee is higher than the arithmetical margin of the comparables no TP adjustment can be made in respect of international transactions on account of application of TNMM - OP/TC has been accepted by the TPO and to support such contention TPO s order for A.Y 2009-10 and 2010-11 are enclosed in the paper book - in view of principle of consistency also different method cannot be adopted for the year under consideration to compare PLI particularly in absence of distinguishable facts and circumstances existing for justification of the same - the calculation of PLI on the basis of OP/OC and by adopting that method the transaction of the assessee is found to be at arms length is approved Decided in favour of assessee. Transfer pricing adjustment Non-charging of interest from AE Held that - The observation of CIT(A) is incorrect as the approach of the assessee in non-charging the interest from its AE and non-AEs is uniform except there being some more delay in receiving the payment from AE - The uniform approach is depicted in the fact that either the assessee is charging interest from AE and non-AE and not charging any interest from them - The approach of the assessee is uniform so as it relates to non-charging of interest from AEs as well as non-AEs relying upon DCIT vs. Indo American Jewellery Ltd. 2012 (2) TMI 366 - ITAT MUMBAI wherein it has been held that there being complete uniformity in the act of assessee in not charging interest from both the AE and Non-AE debtors for almost equal delay in realization no such adjustment can be made as assessee is not avoiding any tax by intentionally not charging any interest from the AEs - if there is a complete uniformity in the act of the assessee in not charging interest from both the AE and non-AEs debtors and the delay in realization of the export proceeds in both the cases is same then the Tribunal was right in deleting the notional interest on outstanding amount of export proceeds which were realized belatedly - no notional interest can be added to determine the ALP to the extent of delay of 173 days from AE transaction as to that extent in any case (even according to CUP method) no adjustment can be made. What would be the interest rate applicable for remaining 20 days Held that - The calculations of the assessee have not been disputed by the Revenue at any stage of the proceedings - addition if any can be made only to the extent of Rs. 9.70 lacs as calculated above and this amount will also fall within the /-5% range therefore no addition can be made as transfer pricing adjustment even on account of non-charging of interest for belated payment received from AEs - no addition on account of TP adjustment in the present case is called for and the addition confirmed by CIT(A) is set aside Decided in favour of assessee. Computation of book profits u/s 115JB Inclusion of profits u/s 10A Held that - CIT(A) has rightly granted relief to the assessee on the basis of Genesys International Corpn. Ltd. vs. ACIT 2012 (12) TMI 491 - ITAT MUMBAI the benefits which are to be provided to the newly established unit in SEZ as per section 10AA of the Act will also be available to the existing units in SEZ - sub-section (6) to section 115JB was also inserted providing that provisions of section 115JB shall not apply to the income accrued or arisen on or after 1.4.2005 from any business carried on or services rendered by an entrepreneur or a Developer in a Unit or Special Economic Zone as the case may be. Hence income of units located SEZ will not be included while computing book profit for the purpose of MAT as per section 115JB(6) of the Act Decided against revenue. Claim of assortment charges Held that - CIT(A) rightly was of the view that the AO also in his order did not mention the exact circumstances under which he applied section 40A(2)(b) as requirement of the section is that AO has to form an opinion that expenditure is excessive or unreasonable having regard to the fair market value of the goods services or facilities for which the payment is made or the legitimate needs of the business or profession of the assessee or the benefit derived by or accrued to him there from so much of the expenditure as is so considered by him to be excessive or unreasonable shall not be allowed as a deduction - before AO certain details were submitted and it was shown that during the year under consideration quantum of small diamonds were in large numbers - CIT(A) rightly granted relief only to the extent of 50% - Decided against revenue.
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