9911796707
TMI Blog2012 (10) TMI 404X X X X Extracts X X X X X X X X Extracts X X X X ..... justification of applicability of CUP method. As the ALP can be worked out only with respect to international transaction of the assessee with its AE it is just and proper to restore this issue to the file of AO with a direction to verify the aforementioned calculations submitted by the assessee after giving the assessee reasonable opportunity of hearing and if the aforementioned calculations are correct then the difference being within the safe harbour of +/- 5%, no addition with regard to ALP should be made - in favour of revenue by way of remand. X X X X Extracts X X X X X X X X Extracts X X X X ..... method to bench mark the said transaction and during the course of hearing before TPO the assessee had additionally taken support of CUP method to bench mark the transaction. The TPO rejected the CUP method in view of the non availability of adequate documentary evidence regarding comparability of diamonds purchased from the AE and Non-AEs and took recourse to the remarks made in the transfer pricing report submitted vide letter dated 12/5/2006 in which it was stated as under: "it is impossible and impracticable to compare the prices in one invoice with that in another though having same description i.e. Rough Diamonds. In fact, even a single invoice of rough diamonds contains different lots, all described as rough diamonds but priced differently and sometimes invoice gives details of only one lot though there are different qualities of goods included in parcel". After rejection of CUP method claimed by the assessee the TPO had proceeded to use TNMM method. The TPO selected certain comparables out of 65 diamond manufacturing cases which had different categories of sale turnover. As the assessee's turnover is Rs. 57.27 crores the TPO selected the comparables having sales between R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect to the transactions made with AE and Non-AE. According to assessee for working ALP under CUP method sufficient data and analysis was furnished and, therefore, TPO was wrong in laying unnecessary emphasis on the general comment given in the TP report. Copies of import invoices and bills of entries duly attested by Custom Authorities were also furnished to TPO and TPO has rejected the same. Ld. CIT(A) has given a chart at page 4 of the impugned order, wherein the assessee has compared transactions of the AE and Non-AEs to show that what rate was charged by its AE was also charged by the unrelated parties and looking into the said details Ld. CIT(A) has accepted the contention of the assessee and has recorded a finding that with the application of CUP method the ALP of AE falls within the range of +/- 5%. Ld. CIT(A) has also upheld the contention of the assessee on TNMM method vide which after giving adjustment sought by the assessee in the comparable margin, Ld. CIT(A) has held that the ALP worked out will be within the safe harbour of 5%, therefore, no adjustment is required. It is against these finding of Ld. CIT(A) the revenue has raised the aforementioned grounds. 4. Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 160,503,306 Operating cost as attributable to AE as determined by TPO + 5% 168,528,471 Actual cost With Labour Charges 167,935,114 Actual purchase price 161,973,522 As actual cost/purchase price falls within ± 5% of ALP no adjustment is called for." 5. On the above facts, Ld. D.R submitted that the CIT(A) was wrong in accepting the CUP method for determination of ALP and taking recourse to the grounds of appeal, which has been reproduced above, it is the case of the Ld. D.R that Ld. CIT(A) has wrongly deleted the addition. So far as it relates to calculations in the aforementioned chart, it was pleaded by Ld. D.R that to verify the calculation the matter may be restored back to the file of A.O. 6. As against that referring to the aforementioned chart it is the case of the Ld. AR that without prejudice to the other submissions of the assessee, if margin taken by TPO is applied, even then the assessee's case will fall within the safe harbour of +/- 5%. He, therefore, submitted that the TPO has wrongly taken into consideration the entire sale of the assessee, whereas according to the provision ALP can be applied only to international transactions of the assessee with ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
