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TMI Blog2010 (7) TMI 520X X X X Extracts X X X X X X X X Extracts X X X X ..... m the Global Trading Division was better than last year and price charged for Niger Seeds was also better - It is also evident that prices charged to 3M US were higher than market price or ALP - Therefore, it cannot be held that price charged was not at arm's length. - Decided in the favour of the assessee X X X X Extracts X X X X X X X X Extracts X X X X ..... or scrutiny by issuance of notice u/s 143(2) of the Act. In course of assessment proceedings, Assessing Officer with the prior approval of the Commissioner of Income-tax referred to the Transfer Pricing Officer (TPO) u/s 92CA of the IT Act, for determination of Arm's Length Price (ALP) in respect of international transaction reported by company for the financial year relevant to asst. year 2004-05. A copy of the Auditor's report u/s 92E in Form No.3CEB filed along with the return of income for the relevant asst. year was also forwarded with the references. The TPO passed an order on 15-12-2006. 3.1 Thereafter, assessment u/s 143(3) was completed on 20-12-2006 fixing the total income of the assessee at Rs.47,22,32,660. In the assessment com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred in determining the arm's length margin by considering new comparable companies at the time of assessment proceedings without providing the assessee the manner of identifying the comparable companies and method of computing the margins. 6. The CIT(A), after elaborately considering the arguments of the assessee, on merits, held in favour of the assessee for the following reasons:- (1) The turnover has been reduced due to crop failure. (2) The expenses incurred on freight increased from Rs.7,82,716 from the previous year to Rs. 19,59,790 for the FY 2003-04 whereas the turnover has been reduced from Rs. 16.67 crores from the previous year to Rs.1.71 crores for the FY 2003-04. Thus, the freight costs accounted for 11.42% of the sales f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that, this is a possibility only if the sales are continued by the associated enterprise in India directly with the customers and the corresponding freight charges are incurred by 3M India. Therefore, it was submitted that the CIT(A) without examining these aspects has erred in accepting the argument of the assessee and giving adjustment on this account. It was contended that the assessee did not explain how the administration and other costs have been increased and if so, to what extent and in the absence of these details, the CIT(A) erred in giving adjustment based on the last year's ratio. It was also submitted that the CIT(A) did not give opportunity to the revenue to verify the facts submitted to her. 9. In response to the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Division. 9.2 The learned AR also brought to notice, the Report of the Commission For Agricultural Costs and Prices provided the average sale price of Niger seeds imported during FY 2002-03 and FY 2003-04 (up to December, 2003) wherein it was ascertained that the weighted average sale price of Niger seeds by Company to its associated enterprise for FY 2002-03 and FY 2003-04 (up to April, 2003) was Rs.22.11 kg. which is more than that the weighted average price of FY 2002-03 and FY 2003-04 i.e., Rs.21.7 kg. which provides a clear indication that the Company has sold the Niger seeds at market rates and the international transaction was at arm's length. 10. We have heard the rival submission and perused the material on record. The Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Global Trading Division was made in July 2003 and subsequently, the Company decided to windup this division on account of unfavourable market and economic conditions. 10.4 In view of the above developments (mentioned above), Company discontinued the operations of the Global Trading Division in August 2003. However, Company incurred cost due to the winding down and closure of the Global Trading which resulted in losses. 10.5 The comparative chart of the operating gross profit margin earned for AY 2003-04 vis-à-vis AY 2004-05 is as under:-- Summarised Profit and Loss A/c for the year ending 31st March, 2003 and 31st March, 2004 S. No. Particulars March 31, 2003 March 31, 2004 Sales 16,67,65,077 1,71,50,386 Commission 16,1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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