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TMI Blog2013 (9) TMI 474X X X X Extracts X X X X X X X X Extracts X X X X ..... r for considering the ALP. - Decided against the revenue. Disallowance of expenditure - Prior period expenditure - Held that:- CIT(A) while upholding the disallowance the expenses has noted that the assessee has not submitted any evidence to prove the that the expenses crystallized during the year either before the Assessing Officer or before CIT(A). From the paper book placed on record it is seen that the statement of expenses very clearly indicates that the expenses relates to A.Y. 2000-01 - Decided in favour of Revenue. - IT Appeal No. 214 (Ahd.) of 2006 - - - Dated:- 21-6-2013 - G.C.GUPTA AND CHATURVEDI , JJ. For the Appellant : Y.P. Verma. For the Respondent : S.N. Soparkar. ORDER:- PER : Anil Chaturvedi The present appeal is filed by the Revenue against the order of Ld. CIT(A)-VI, Ahmedabad dated 7.11.2005 for assessment year 2002-03 and Assessee has also held cross objection against the order of CIT(A). 2. The facts as culled out from the order of lower authorities are as under. 3. We first take up appeal of Revenue (ITA No. 214/Ahd/2006). 4. Assessee is a company engaged in the business of Manufacturing/ Refining and Trading of Edible Oil. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure which has been adopted by the Assessing Officer. Therefore, I agree with the Assessing Officer in disallowing the proportionate expenditure attributable to such tax exempt income. However, I find that there is a calculation error in determining the disallowance as the Assessing Officer has taken the gross receipt as Rs. 116,36,98,3777/- in place of Rs. 116,38,69,8377/- After considering correct gross receipts which have been mentioned by the Assessing Officer himself in para-2 of the assessment order, the disallowance u/s. 14A comes to Rs. 7536/-. Therefore, the disallowance to the extent of Rs. 7536/- is confirmed and remaining amount is deleted. Accordingly, this ground is partly allowed. 6. Aggrieved by the order of CIT(A) the Revenue is now in appeal before us. 7. Before us, the learned D.R. relied on the order of Assessing Officer and on the other hand the ld. A.R. did not seriously press the issue. 8. We have heard the rival submissions and perused the material on record. Before us, the learned D.R. could not controvert the findings of CIT(A) and thus we find no reason to interfere with the order of CIT(A) and thus this ground of Revenue is dismissed. Ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompiles information of various countries and, therefore, is broad based data base. The quotation adopted by the appellant from Oil World is for Malaysia and not for Germany. Therefore, it is an authentic independent trade quotations and is duly covered under the various documents which has been listed in sub-rule (3)(b) (c)-,of Rule 10D of the IT. Rules. As this is an independent-organization which is giving quotation of different countries, this cannot be ignored by the TPO without any valid reason. As the international transaction entered with AE is less than 5% of the arithmetical mean of these two quotations i.e. MPOB and Oil World, as per proviso of Section 92(c) the appellant was justified in taking the international transaction at arm length. Therefore, no adjustment u/s.92(c) was required as all the prices at which the purchase have been made are less than 5% of the arithmetical mean. Besides the above, I also find that the appellant has entered into contact with AE on long term basis for continuous supply of constant quality to ensure continuity in production into continuous plant which is also an important factor for considering the ALP and due weightage is required to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch document is acceptable in light of the method selected by the assessee. Equal weightage to all documents is neither implied in the rules nor is acceptable as a rationale inference. * It is an established fact that CUP entails strict comparability. Such a view has ~ also been supported by a number of ITAT judgments. It is also accepted that commodity prices fluctuate daily as well as over different geographies. Hence if there is an evidence of daily fluctuation, a weekly price publication would not serve as reliable CUP. Commodity prices have extreme geographical sensitivity. Hence, a price quote without revealing the basket of quotes which have been averaged cannot be taken as a representative quote for a particular geography. * In face of availability of proper and reliable CUP being available, an indirect price index based on trader interviews cannot be held to be at equal footing with direct trade prices in the same market. The Oil World quote is liable to be rejected on this ground alone. 2. THE MALAYSIAN BOARD PRICE OFFERS A DIRECT CUP WHICH IS TO BE PREFERRED OVER OTHER PRICES - being direct CUP in the same geography * In the instant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Against the various lacune observed in the published data of Oil World as far as its adoption as valid CUP with respect to imports made by the assessee from Malaysia, the MPOB price quotations are found to be an exact CUP. The geographical similarity, the pricing based on local quotations and availability of daily published data gives a transparent and reliable means to benchmark the price paid to the AE. 4. ISSUE OF LONG TERM SUPPLY IS NOT BASED ON ANY DOCUMENT SUBMITTED BY THE APPELLANT AND IS HENCE IRRELEVANT * The finding given by CIT(A) at para 4.4. that variation in prices is justified as the appellant has entered into long term contract for supply of goods is erroneous and is not based on any documentation on record. The CIT(A) has wrongly relied on mere contention made by the appellant that the contracts were long term contracts. Neither copy of long term contracts have been submitted before TPO nor it has been demonstrated that the long term contracts resulted in higher cost of goods purchased from the AE. In view of absence of both the above data. If at all, the CIT(A) could have effected adjustment to the arm's length price based on data supplied by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AT held that even under amended provisions such benefit is not available. 11. The learned A.R. on the other hand supported the order of CIT(A). We have heard the rival submissions and perused the material on record. CIT(A) by well reasoned order has given a finding that the Oil World is an independent organization established in 1958 in Germany and provides independent forecasting services for oil seeds, oils and meals and providing primary information and professional analysis. He has further noted that the quotation adopted by Assessee from oil world is for Malaysia and not for Germany. The quotation on is an independent authentic trade quotation which cannot be ignored without any valid reason. He has further noted that no adjustment under section 92 (C) was required as all the prices at which the purchases were made were less than 5% of the arithmetical mean of the quotation from MPOB and Oil World. He has further noted that the assessee had entered into contract with A.E on long term basis for continuous supply of constant quality as to ensure continuity in production which was also an important factor for considering the ALP. 12. Before us the Revenue could not controvert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing this expenditure of earlier year. However, I find that the appellant has also offered income of Rs.13,742/- of earlier year. Therefore, the net expenditure of earlier year after offsetting this income will remain Rs.5,67,308/-. Therefore, the disallowance - to.- the extent of Rs.5,67,308/- is hereby confirmed. Accordingly, this ground of appeal is partly allowed". 17. Before us, the learned A.R. submitted the statement of expenditure debited to Profit and Loss Account at Page 55 of the paper book which was forming part of Tax Audit Report He submitted that the expenses have crystallized during the year and therefore that same should be allowed. He further placed reliance on the decision in the case of Toyo Engg. Ltd. v. Jt. CIT [2006] 5 SOT 616 (Mum.) and the decision in the case of CIT v. Jagatjit Industries Ltd. 339 ITR 382. The learned D.R. on the other hand supported the order of Assessing Officer and CIT(A). 18. We have heard the rival submissions and perused the material on record. CIT(A) while upholding the disallowance the expenses has noted that the assessee has not submitted any evidence to prove the that the expenses crystallized during the year either before the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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