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TMI Blog2014 (4) TMI 200X X X X Extracts X X X X X X X X Extracts X X X X ..... vour of assessee. - ITA NO. 7281/Mum/2012 - - - Dated:- 23-10-2013 - P.M. JAGTAP And AMIT SHUKLA , JJ. For the Appellant : Vijay Mehta. For the Respondent : Ajeet Kumar Jain. ORDER:- PER : Amit Shukla This appeal has been filed by the assessee against final assessment order dated 30.10.2012, passed in pursuance of direction u/s 144 C (5) given by the Dispute Resolution Panel, (herein after referred to as DRP) for the quantum of assessment passed u/s 143(3) r.w.s 144C(13) for the assessment year 2008-09. The only issue involved in this appeal is with regard to transfer pricing adjustment of Rs. 9,07,50,472/- on the transactions with Associated Enterprise (AE). In the original grounds of appeal, the assessee has raised several grounds with various sub grounds, however these ground have been concised now and only following grounds of appeal has been raised: 1. The assessment order passed by the learned Assessing Officer u/s 143(3) r.w.s 144C(13) pursuant to the directions of learned 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. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was specifically brought to the notice of the assessee. However the assessee submitted vide letter dated 16.9.2011 that it had already submitted the transfer pricing study report, which fact has been found to wrong and has also been rebutted by the TPO, by categorically stating that no such report has been filed and only form 3CEB was filed. He has also observed that assessee has failed to submit the most appropriate method selected by it for bench marking the transaction of purchase and sale from AE and has also failed to justify how the mark up rates has been charged from the AE. The economic analysis and FAR test has not been under taken by the assessee and, therefore, it is very difficult to bench mark its transaction. Since no method has been selected by the assessee, the TPO suggested the TNMM (Transactional Net Margin Method) as a method of last resort and accordingly gave nine set of comparables to the assessee to submit its objections. The assessee's main contention 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 the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een clearly stated that most appropriate method for bench marking the transaction with its AE was Cost Plus Method (CPM). He, further submitted that looking to the overall functions performed and transactions undertaken by the assessee with its AE, neither the comparables chosen by the TPO can be adopted for bench marking the transaction, nor the TNMM method can be held to be the most appropriate method in the instant case. The reason being that the raw materials are mostly supplied by the foreign AE, which is as per the cost only and the assessee is manufacturing the jewellery as per the designs given by its AE only. What the assessee is receiving is only the job work charges and the margin of the job work charges received by the assessee is far better than those compared to other such comparables engaged in the similar kind of activities. As an example, he submitted that if the cut and polished diamonds of particular quantity are received by the AE at 100 Dollar then the same quantity is sent back on 100 Dollar only and to illustrate this contention that assessee's purchase of raw material is at cost and sold on same cost only, he referred to various invoices in the paper book. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08 reported in (2013) 34 Taxmann. Com 203. Regarding internal comparability, he relied upon the third member's decision in the case of Tecnimont ICB (P.) Ltd. in ITA 4608/Mum/2010 and 5085/Mum/2010. He thus submitted that since all these aspects have not been examined properly by the TPO as well as the DRP, therefore, the matter can be set aside to the file of TPO for adopting the CUP as the most appropriate method, as all the relevant material for internal comparability is already available on record. 5. The learned CIT DR, Shri Ajit Jain, on the other hand submitted that first of all, the transfer pricing report which is the primary document to be submitted by the assessee before the TPO has not been filed and the same is being filed before the Tribunal as an additional evidence which could not be considered at this stage. In any case if the same is to be admitted then the matter should be sent back to the TPO for examining the same afresh. He also submitted that, TPO, only after giving various opportunities to the assessee has adopted the TNMM as most appropriate method and has also given the list of comparables to the assessee. After calling for assessee's objection and discu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parability analysis by following any of the prescribed method under the Act and, therefore, its international transactions with its AE has not been bench marked by the assessee. Thus, the TPO has resorted to apply TNMM as the most appropriate method and has also given set of nine comparables to the assessee. After calling for the objections by the assessee, he has finally determined the PLI margin of the comparables at 10.95% which was much higher than assessee's PLI which was at (-) 1.25% and thus made the total adjustment of Rs. 9,07,50,742/-. 7. First of all, in this case it is noticed that this appeal was heard earlier on 9.5.2013 which was later on released, vide order-sheet entry dated 23.5.2013 after observing as under: "After going through the record, it is seen that assessee has not selected any method for bench marking its ALP in relation to transactions with its AE and no TP study report was also furnished. Later on at the stage of TPO, one report n Form 3CEB was filed by adopting Cost Plus Method. However, in the said report no comparables were selected to evaluate the controlled and uncontrolled transaction, therefore, in such a situation CPM failed. The TPO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... analyzing and bench marking the international transaction and also the first onus of the assessee has not been filed before the TPO. In the paper-book filed earlier, the assessee has given a certificate that the TP study report was filed before the TPO/AO which has been found to be factually incorrect. This has now been rectified by the Ld. Counsel at the second time of hearing before us, by providing a correct certificate that TP study report is an additional evidence. In pursuance thereof, the petition for admission of additional evidence 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 reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h some external comparabilities by carrying out FAR analysis, if CUP method fails in this case. 11. Thus looking to the entire gamut of facts and circumstances of the case, we remand back the entire matter of transfer pricing adjustment to the file of TPO/AO to consider the assessee's plea for applicability of internal CUP and carry out comparability analysis afresh with the unrelated parties. If the CUP method fails, the Cost Plus Method could also be examined after calling for fresh comparables which are engaged in the similar line of business. The assessee will provide all the necessary information and material in support of its contention, firstly, as to what would be the most appropriate method and secondly, will also provide the internal or external comparables for bench marking its transaction with the AE. The TPO/AO will also provide due and effective opportunity to the assessee to explain its case with any such evidence or material as it may deem fit and TPO/AO shall examine the same afresh. Thus the entire assessment is set aside for fresh adjudication in the light of observation made in this order. The AO will also recover the cost of Rs. 10,000/- from the assessee whi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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