9911796707
TMI Blog2011 (12) TMI 178X X X X Extracts X X X X X X X X Extracts X X X X ..... e than 5% as held in case of Emersons Process Management India (P.) Ltd. v. Add CIT ([2011 (8) TMI 427 - ITAT MUMBAI]). The computation made by the AO is, therefore, required to be reworked. As regards the GP rate, addition was made due to fall in G.P. Rate the reason for which was explianed by assessee. The AO has not pointed out any defects in the books of accounts. In relation to international transactions with the AE, there is provision for separate TP adjustments, and merely because there is TP adjustment, entire books cannot be rejected in the absence of any defects. Further, while computing the GP rate for the year, for the purpose of comparison with the earlier year, the AO had not made any allowance for TP adjustments, which would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 33% compared to 26.63% in the immediate preceding year. The assessee gave the following explanation for the fall in GP rate :- (a) Phoenix Mecano India Limited had set up die casting plant in 2006 which resulted into increase in export sale by 133% over previous year which in turn resulted in increase in expenses mainly in material cost/manufacturing/ administrative/financial expenses. (b) The gross profit ratio of the assessee has reduced in A.Y. 2007-08 as compared to A.Y. 2006-07 by approximately 5% was due to change in the proportion of trading and manufacturing activity. (c) The gross profit ratio has reduced due to increase in material cost by approx 2% and manufacturing expenses by approx 3%. (d) The increase in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e claim of increase in material cost and manufacturing expenses and the effect of foreign exchange fluctuation on the material cost. In any case, it was submitted that there being no defects in the books of accounts, no addition could be made on account of GP rate. As regards, the TP adjustments, the Ld. AR did not dispute the TNMM method followed by the AO. He, however, objected to the TP adjustment in respect of the entire sales, whereas it should have been only with respect to the international transactions with the AE. He placed reliance on the decision of Mumbai Bench of the Tribunal in the case of Dy. CIT v. Starlite [2010] 40 SOT 421 and several other decisions of Tribunal in support of the said proposition. The Ld. AR, referring to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Similarly, in the pre 01.10.2009 position, the benefit of 5% is to be allowed to the assessee, even in cases where difference in value of international transactions and its ALP is more than 5% as held by the Tribunal in case of Emersons Process Management India (P.) Ltd. (supra) and in other cases. The computation made by the AO is, therefore, required to be reworked. As regards the GP rate, the AO made the addition only on the ground that the GP rate had fallen compared to the previous year and that the explanation given by the assessee was not substantiated by evidence. The AO has not pointed out any defects in the books of accounts. In our view, in the absence of any defects, books of accounts cannot be rejected. In relation to interna ..... X X X X Extracts X X X X X X X X Extracts X X X X
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