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TMI Blog2014 (1) TMI 852X X X X Extracts X X X X X X X X Extracts X X X X ..... l these extra-ordinary items explained by the assessee before the TPO - there will be no operating profit available for making ALP adjustment when the extra-ordinary items are given due treatment - nothing will be remained to make any addition by way of ALP adjustment - the order for entire ALP adjustment made by the assessing authority set aside – Decided in favour of Assessee. - ITA No.2257(Mds)/2012 - - - Dated:- 17-6-2013 - Dr. O.K.NARAYANAN AND VIKAS AWASTHY , JJ. For the Appellant : T. Banusekar. For the Respondent Shaji P. Jacob. ORDER:- PER : Dr. O.K. Narayanan This appeal filed by the assessee relates to the assessment year 2008-09. This is a Transfer Pricing Appeal. The appeal is directed against the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in rejecting the following adjustments to operating cost sought by the appellant: impact of higher material costs impact of delayed indigenization impact of premium freight costs impact of the Quality costs impact of the selling expenses of domestic product impact of the exchange fluctuation impact of the provision made for outstanding derivative contracts. 7. For that without prejudice to the above, the Assessing Officer further erred in failing to appreciate that the provision for outstanding derivative contract was already added back in computing the total income and that the provision was in the nature of finance charges and that therefore there was a need to adju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifference between the PLI of comparables and the PLI of the assessee with AE. This difference works out to 2.27% minus 1.13%, which is equal to 1.14%. But, the Transfer Pricing Officer (TPO), on the other hand, has worked out the difference at 5.81%. The PLI of the assessee-company as a whole is -3.54%. The Assessing Officer worked out the difference by adding this -3.54% and the PLI of comparables at 2.27%. Prima facie, the working out made is erroneous. When the PLI of comparables is 2.27% and the PLI of the assessee with AE is 1.13%, both being undisputed, the addable difference should be 1.14%. We accept this contention of the assessee. 5. When the difference is adopted at 1.14%, the adjustment to be made would be Rs. 1 crore. The AE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for transactional net margin method to determine the ALP. The TNMM employed in the present case by the assessee has been employed by the TPO. When the TPO has accepted the TNMM adopted by the assessee, the entire rules relating to TNMM ought to have been applied by the TPO. The net profit margin realized by the enterprise from an international transaction entered into with an associated enterprise is computed in relation to costs incurred or sales effected or assets employed or to be employed by the enterprise or having regard to any other relevant base. The rule has provided for the discretionary use of the cost inputs. It is in this context that one has to bear in mind that extraordinary items have to be excluded from the normal realm of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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