9911796707
TMI Blog2011 (1) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... s: "The ld. CIT(A) erred in confirming the arm's length price adopted by the ACIT (International Taxation), Circle 19(1),Bangalore, for the following reasons :- (i) By adopting the written down value of assets of its office inIndia as it appeared in the financial statement in accordance with Company Law, (ii) by rejecting the valuation report furnished by the assessee from a Chartered Engineer and Registered Valuer, (iii) by holding that the assessee transferred its business (and not assets in specie) to its AE. 4. From the grounds raised by the assessee, only three moot questions arises: (i) Whether the valuation of the assets based on the written down value as per the Company Law stated in the financial statements of the assessee should be adopted, or value determined by the Registered Valuer and Chartered Engineer should be adopted considering it to be "Comparable Uncontrolled Price method" as proposed by the assessee? (ii) Whether rejection of the valuation report submitted by the assessee from a registered Chartered Engineer is justifiable? (iii) Since the Indian branch of the assessee is sold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill be crucial for ascertaining the ALP of the transaction. u The fair market value computed by the registered valuer is purely based on arbitrary rates and unreasonable assumptions rather than on any sound basis. The registered valuer has adopted unduly high rates of depreciation without any scientific or rational basis. These assumptions of the registered valuer are highly general and subjective and not based on statistical data, empirical evidence or comparable instances. u The fair market value of resold improvements have been worked out by the registered valuer at Rs. 72,27,677 while its WDV as per the Act was 1,29,40,455. It could be seen from the depreciation schedule worked out as per the Act itself that there was an addition of Rs. 74,29,821 under "leasehold improvements" during financial year 2002-03. From the perusal of the valuation report, it could be noted that the registered valuer had not determined any value for "leasehold improvements" made in earlier years, which are shown at Rs. 80,30,752 in the books of account and at Rs. 69,48,462 in the depreciation chart worked out as per the Act. 7. Before us, the Ld. AR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant is one amongst the most reputed valuers in the city, whose reports are generally accepted by the tax department. He is also not related to the assessee in any manner. Therefore, there is no reason to doubt his integrity or bonafide of his valuation report. u The Revenue has not found any specific defects in the Registered Valuer's report, but has passed only generalized comments to reject it. In fact, the figures worked out by the Registered Valuer are on the higher side. u The Revenue's action of treating the book value of the asset as ALP is not justifiable. The rates prescribed under the Companies Act have remained static over a long period. This clearly shows that such rate of depreciation does not reflect the correct diminution in the value of the assets in the challenging, highly volatile and unpredictable market conditions of the present day. In these circumstances, the valuer's report which has taken into consideration of all factors affecting the marketability of the assets is more appropriate to rely upon. It is also a settled law as per principles laid down by theHon'ble Apex Courtthat accounting principles cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods: (i) identify the price charged to the items sold in comparable uncontrolled transaction or in a number of such transactions. (ii) Adjust such price to account for the differences if any, between the International transaction and the comparable uncontrolled transaction or between enterprises entering into such transactions which could materially affect the price in the open market. The presence or absence of any special feature in the uncontrolled transaction as compared to the International transactions is to be adjusted for in mathematical terms or absolute numbers. (iii) Such adjusted price is the ALP. (iv) The ALP is now to be compared with the price charged in the international transaction. (v) If price charged in the international transaction is lower than the ALP or higher than the ALP, then an adjustment is to be made for the price charged in the international transaction by the amount of such variance. This method is suitable when an independent enterprise sells the same product as is sold between two associate enterprises. The unco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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