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TMI Blog2012 (9) TMI 615X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant Anupama Shukla for the Respondent ORDER Dr. O.K. Narayanan, Vice-President This appeal is filed by the assessee. The relevant assessment year is 2006-07. This is a transfer pricing case. The appeal is directed against the assessment order passed under sec.143(3) read with sections 153A, 153C and 144C of the Income-tax Act, 1961. 2. The assessee is an exporter of minerals. The minerals exported are Barite Powder, Bentonite Lumps, Potash Feldspar etc. The assessee mainly exports these minerals to its Associated Enterprise(AE), namely, Trimex International at Dubai. The assessee also makes occasional exports to non AEs, as well. 3. In determining the Arm's Length Price(ALP) in the transfer pricing transactions, the matter was referred to the Transfer Pricing Officer(TPO)-III at Chennai. The TPO passed her order u/s.92CA on 30.10.2009 suggesting an addition of ₹ 3,90,47,364/-. 4. The assessee has exported five varieties of minerals during the previous year relevant to the assessment year under appeal. Those varieties are : ( i ) Barite Powder ( ii ) Bentonite Lumps ( iii ) Bentonite Powder ( iv ) Potash Feldspar Lumps ( v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sactions on the ground that the transfer price is not at ALP. 11. We heard Shri B.S. Purushottam, the learned Chartered Accountant appearing for the assessee and Smt. Anupama Shukla, the learned Commissioner appearing for the Revenue. 12. The learned counsel explained that the TPO has made upward revision of sales price in respect of 5 products independently, of which the total comes to ₹ 3,90,47,634/-. 13. Regarding the adjustment of ₹ 1,07,85,472/- made by the TPO towards Barite Powder sales, the contention of the learned counsel is that the comparison made by the assessee with sale price by its competitor was fair enough, as there was no material difference between the assessee and its competitor. In respect of comparison of prices of other players in the field, the TPO has compared the sale prices of the assessee, relating to the sales made to AE and relating to the sales made to non AE. The learned counsel submitted that the sale of Barite Powder to non AE was a small quantity of 324 MT compared to the sale of 8250 MT to its AE. He explained that the qualities were also differed. The regular business of the assessee is export of minerals to its AE at Dubai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while making study of transfer pricing. The learned counsel contended that in the present case, no such study was made by the TPO. 16. The learned Commissioner appearing for the Revenue, on the other hand, submitted that the TPO has considered the matters in a very detailed manner and the TPO has adopted the price disclosed by the assessee itself while adopting CUP method for analyzing the international taxation. The learned Commissioner explained that the assessee has provided the case of one outsider for comparison. The assessee itself has details of different sales made to different parties. Therefore, she submitted that in the nature of business carried on by the assessee, the transfer pricing study made by the TPO is comprehensive and the ALP adjustment suggested by the TPO is just and reasonable. She, therefore, submitted that the assessment orders may be confirmed. 17. We have heard both sides in detail. 18. First of all, we have to say that the DRP at Chennai has not applied their mind to the merits of the case, as explained by the assessee, before us. This position is clear from paragraph 5 of the proceedings of the DRP which is reproduced below : 5. We have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in this case. That study would be only academic. 22. In fact, the assessee has compared its sale price to the AE with that of the export rate of the competitor, M/s. IBC Ltd. In the case of Barite Powder, the export price by M/s. IBC Ltd. was US$ 51.65 per MT, whereas the price realized by the assessee for the shipment made in April 2005 was US$ 48.50 per MT and US$ 54.50 per MT for the shipment made in September, 2005. The average price realized by the assessee on export of minerals to its AE is very much comparable to the price reflected in the transactions made by its competitor, M/s. IBC Ltd. As already stated, for the earlier assessment year 2005-06, the assessee is operating in a very limited sphere. The assessee and its competitor, few in number, have obtained licences from State Government undertaking of Andhra Pradesh on the basis of public auction. The dealers in this field are few in numbers. This is mainly because the exporters of bulk minerals are very few in India. Therefore, as pointed out by the assessee, there cannot be a large number of cases available for comparison. 23. The most important point is that in the case of assessment of M/s. IBC Ltd., the auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the TPO has not considered the quality variation in the minerals exported by the assessee. The assessee has in fact filed chemical analysis report before the TPO to show that different consignments have different qualities depending upon the contents of potash, nitrogen etc. The chemical analysis report submitted by the assessee showed that different consignments have different chemical compositions and therefore, they vary in quality. The price is of course, fixed on the quality of the minerals exported by the assessee. 28. The assessee has also pointed out an example to the TPO that mistakes occur sometimes in the invoices/shipping bills where Lumps are shown as Powder. Powder is sold for a better price. 29. In the light of the detailed discussion above, we come to the following findings: (1) The TPO has not made any external comparison of the prices, even though the assessee has furnished the price details of M/s. IBC Ltd. The TPO has accepted the particulars furnished by M/s. IBC Ltd. in the assessment of that company whereas there is no material difference in the price quoted by the assessee and that company. (2) The TPO has adopted the special sale price attr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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