9911796707
TMI Blog2011 (9) TMI 589X X X X Extracts X X X X X X X X Extracts X X X X ..... O erred in making transfer pricing adjustments in respect of the international transactions of Otto Bilz. 2. Rejection of segmental margin analysis of the appellant between Associated Enterprises and Non Associated Enterprises. 3. The Hon'ble DRP and the ld. AO erred in concluding that the allocation keys to the segmental margin analysis of Otto Blitz, does not explain the variation in the ratio of cost allocated to Associated Enterprises and Non Associated Enterprises. 4. The Hon'ble DRP and the ld. AO erred considering the margins of the company on overall basis and not segment wise basis. 5. The Hon'ble DRP and the ld. AO erred in not considering the impact of labour unrest for a period of 64 days during the financial yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to different segments and products should be directly proportionate to the sales revenue earned in the respective segment/product. Further, the revenue erred in concluding that the cost allocated between associated enterprises and non-associated enterprises are not reliable as the cost allocated is not directly proportionate to the sales revenue of each segment. Ld. AR explained that the complete details of the basis of segment net margins were calculated by the company. The segmental margin calculation was based on the "activity based costing system" followed by the company wherein cost is calculated in respect of each product manufactured by considering the material cost, direct cost based on machine hour rate for manufacturing of produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to AE are mainly in the nature of advertisement and selling expense which are not related to AE. Further, complete details relating to the calculation of cost to AE and non-AE were identified by (a) derivation of material cost through route cards (b) the machine hours were also tracked through route cards and cost worked out on machine hour basis (c) the cost of utilization of machine were worked out by (i) asset deployment cost, (ii) power, (iii) spare tools and consumables, (iv) salary commission operators, (v) air compressor charges, (vi) general expenditure. 4. Ld. AR prayed that since the TPO had not examined all the records produced by the appellant and so the matter may be remitted back to the file of ld. TPO for a clear find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated above and what was explained during the discussion at the time of hearing, it is seen that total cost is equal to work Cost plus Facility cost. Here WORK cost = material cost + Conversion cost + Production support cost. Material cost is as per route cards. Conversion cost = (time for which used X Machine hour rate) in respect of each machine used for conversion. Production support cost = On the basis of quantity released for production. Facility cost - It is taken on the basis of sale value of products. The above allocation keys, however, do not explain the wide variations in the cost allocations in AE and other segments. It may be seen from the tables given in paras 6 and 7.1 that the AE sales are about 47% of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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