9911796707
TMI Blog2014 (4) TMI 200X X X X Extracts X X X X X X X X Extracts X X X X ..... d DRP is bad in law. 2. The learned DRP erred on facts and in law in confirming the addition of Rs. 9,07,50,742/- on account of transfer pricing adjustment. 3. The appellant craves leave to add, alter or amend the grounds of appeal. 2. Besides aforesaid grounds the assessee has also raised two sets of 'additional grounds' one filed on 19-6-2013 and another set of additional ground filed on 28-8-2013. However at the time of hearing, the learned Counsel, Shri Vijay Mehta submitted that only the second set of additional grounds, which has been raised vide petition dated 27th August 2013 (filed on 28th August 2013), should only be taken for consideration and the earlier set of additional grounds filed vide petition dated 19-6-2013 are being not pressed. The learned counsel has also filed a petition dated 28-8-2013 for admission of additional evidence, wherein the transfer pricing study report has been filed which has been stated that same could not be filed at the stage of TPO or before the DRP. 2.1 The facts of the case, in brief, are that the assessee company is engaged in the business of manufacturing of diamonds and precious sto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n before the TPO for rejection of some of the comparables was that the turnover of these companies were not comparable with that of the assessee and the business function was also different. The TPO rejected these objections, firstly, the turnover criteria for rejecting the comparables cannot be adopted as the assessee itself had not carried out any FAR analysis and secondly, other minor objections raised by the assessee have no basis. All this have been dealt by the TPO at page 3 of his order. The TPO also noted that the assessee's has contended that it is a manufacturer of jewellery in SEEPZ and SEZ for which it is entitled for deduction u/s 10B; because it is registered as a manufacturer of jewellery, however at the same time assessee has claimed its profitability merely as a job worker and is also claiming benefit u/s 10B. Thus the assessee is claiming to be manufacturer for the purpose of deduction u/s 10B but when for the purpose of determining the arm's length price, the assessee has objected the comparables on the ground that it is only a job worker and other comparables are jewellery manufacturer. Accordingly he rejected all the objections of the assessee. Ultimately the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oices in the paper book. It is only for the purpose of custom law that the assessee had to pay the custom duty on such purchases as per the requirement of custom and excise law. However the purchase and sale is only notional and what the assessee has been remunerated; is only the labour charges along with the mark up. The TPO as well as the DRP has failed to understand the business module of the assessee and in such a situation not only the comparables but also the method applied by the TPO cannot be accepted. Since the assessee is not engaged in the function of purchases, therefore, the comparison cannot be made with the companies who are doing purchases from the third parties. In support of his contention that purchases has been made from the AE on same quantity and value on which it has been sent back to the AE in the form of jewellery, he relied upon various documents placed in the paper book in the form of invoices. Thus the assessee has not made any profit on the purchase price. 4.1 He also submitted that in this case there were transactions with Non AE also and no profit has been charged on purchase and sale from non AEs as the assessee's margin is only on account of labour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee's objection and discussing them in detail, he has finally chosen the comparables and has bench marked the assessee's PLI with that of the comparables. Thus there is no ambiguity or irregularity in the order of TPO. He further submitted that the assessee has been changing its stand and there is no consistency in its approach, firstly, before the authorities below it has been contended that Cost Plus Method should be adopted, however no such bench marking or FAR analysis was given vis-à-vis any comparables. Now at this stage, the assessee has taken altogether new stand by submitting that CUP is the most appropriate method and there are internal comparables in the form of non AE. All these plea are completely new which is being taken before the Tribunal for the first time and, therefore, the same cannot be entertained. In any case without prejudice, if such a plea is being entertained now then the entire matter needs to be restored to the file of TPO to examine the contention of the assessee afresh and in accordance with the facts and materials placed on record and also in accordance with the law. 6. We have carefully considered the rival submissions and perused the relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, in such a situation CPM failed. The TPO has selected 9 comparables with average mean margin of 10.95% as against assessee's margin of (-)1.25%, by adopting TNMM as most appropriate method. The Ld. AR argued only to justify the net profit and margin earned by the assessee. He has not addressed us on the transfer pricing issue, as to how the ALP is justified after comparing, the controlled transaction with the related party with that of the uncontrolled transaction with the independent party. Under the transfer pricing mechanism ALP can be determined only by following any of the prescribed methods and by carrying out comparability analysis vis-à-vis comparables. Thus, we feel that this matter should be released and should be heard a fresh on the aforesaid aspect and also about the selection of comparables. Accordingly the case is released. Sd/- Sd/- (AMIT SHUKLA) &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidence has also been filed, wherein the TP study report has been annexed. In the TP study report also, the assessee had stated that CPM is the MAM for determining the arm's length price of the assessee with its transaction with the AE and there is no whisper about applicability of internal CUP. 9. Under these circumstances it becomes very difficult to adjudicate as to, firstly, what is the stand of the assessee and secondly what could be the most appropriate method which has to be adopted for determining the ALP. Considering such a callous attitude of the assessee and also furnishing of false certificate in the paper book, which was there in the record when the case as heard finally and later on released on this ground only, we think, that some cost should be imposed upon the assessee to deter the assessee in future for resorting to such kind of making false representation before the court. Accordingly, we impose a cost of Rs. 10,000/- to the assessee which shall be deposited by way of challan before the AO. 10. Now coming to the main issue in the present case as to what could be the MAM to determine the ALP for the transactions carried out with the AE. It has been stated that a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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