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TMI Blog2011 (3) TMI 269X X X X Extracts X X X X X X X X Extracts X X X X ..... llowance - Appeal is allowed by way of remand X X X X Extracts X X X X X X X X Extracts X X X X ..... PO, on the basis of which ALP was determined in the TP order; 2.8 denying the benefit of (+/-) 5 per cent [as per proviso to section 92C(2) of the Act] available to the appellant; 3. That on the facts of case and circumstances of the case and in law, both ld. DRP/Assessing Officer erred in upholding the disallowance of actual inventory written off amounting of Rs.20,87,932 by treating the same as capital in nature without appreciating that write off inventory arose in the normal course of business and is on revenue account and erred in; 3.1 denying the deduction of demonstration inventory written off amounting to Rs.1414,634 (out of the total disallowance of Rs.2,087,932) by holding the same is capital in nature; 3.2 denying the deduction of spare parts and other small value items consumed in the normal course of business amounting to Rs.673,298 (out of the total disallowance of Rs.2,087,932) by wrongly treating the same as part of demonstration inventory written off; 3.3 without prejudice, in not allowing the depreciation on demonstration inventory and other inventory even though holding it as capital expenditure and alternatively not allowing the same on deferred basis. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments and material on record, decided the matter as under: 2. Arm's Length Price under section 92CA(3) The assessee company is a wholly owned subsidiary of Agilent Technologies Europe B.V. The assessee is engaged in the business of sale and servicing of medical, analytical, testing and measurement equipments. During the relevant financial year, the assessee undertook various international transactions as mentioned in its 3CEB Report filed along with the return of income. Assessee adopted INMM as the most appropriate method for determining the Arm's Length nature of international transaction, except for payment of interest on loan where CUP method was used and reimbursement of expenses were benchmark based on no specific method. The TPO has proposed adjustments to the sales facilitation transaction of the assessee. The TPO has rejected OP/VAE as the Profit Level Indicator (PLI) relying on Rule 10B of the Income-tax Rules, 1962. As per this Rule, what can be taken as PLI is clearly mentioned in view of this the objections raised by the assessee cannot be accepted and we see no reasons to interfere with the order of the TPO. The TPO rejected the comparable companies used by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noring that the use of such PLI is not in conformity with the principles of transfer pricing analysis; that the DRP erred in accepting 2 out of 3 companies selected in the TP order for the immediately previous assessment year, i.e., assessment year 2005-06 for comparison with the assessee; that the DRP erred in arbitrarily computing the OP/OC margins of the selected companies without giving due consideration to the FAR profile of either the assessee or the comparables; that the DRP erred in holding that only the current year data, for comparable companies, should be used for comparability analysis, even though the same was not necessarily available to the assessee at the time of the preparing its TP documentation; that the DRP erred in failing to give a reasonable opportunity to the assessee to refute the basis on which the adjustment had been made by the TPO in the TP order and in not considering the arguments and evidence brought on the file by the assessee and not disclosing the information/documents/analysis carried out by the TPO on the basis on which, the ALP was determined in the TP order; that the DRP erred in denying the benefit of (+/-5 per cent) available to the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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