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TMI Blog2014 (12) TMI 467X X X X Extracts X X X X X X X X Extracts X X X X ..... sfer Pricing)-IV, Pune (TPO) u/s 92CA of the ITA, 1961 for determining the Arm's Length Price (ALP) of the appellant's International Transactions; without forming any opinion as envisaged u/s 92C(3) of the ITA, 1961. 2. The Hon'ble Dispute Resolution Panel (DRP) erred in law and on facts in sustaining addition of Rs. 96,49,504/- to the appellant's income on account of transaction of sale of finished goods to the AE parties; as so proposed by the TPO vide order u/s 92CA(3) of the ITA, 1961. 3. The Hon'ble DRP, TPO and AO erred on facts in not appreciating the appellant's requests for benchmarking sales transactions to the AE parties, under various alternate approaches as follows : - Comparison of Transaction-by-Transaction sales rate - C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iated enterprises. Company made Total export sale of 15,69,025 kgs. of stitched bond fabric for Rs. 15,60,27,886/- to AE and 344,295 kgs for Rs. 3,67,22,755/- to non-Associated Enterprises. The company decided the prices of sales of stitched bond fabric on a transaction to transaction basis. The reasons for different prices at different times are factors such as petroleum price, yarn price, glass price, etc. on a global basis. 4. A.Y. 2007-08 was first year of operations of the Company and company required strong support from the associated companies to achieve the volume and use of the capacity. During the bench marking process, in order to compare the price at which goods are sold to Associates Enterprises and Non Associated Enterprises, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... UP approach, same period transactions ought to be compared so that correct benchmarking takes place. The Learned Assessee's Representative submitted that as per working on Page-71 of the Paper-Book, export sales rates in the month of March-2007 have increased drastically. It was submitted, for a correct benchmarking, transactions of March-2007 ought to have been ignored. Similar situation arose in February-2007 (in particular after 2-2-2007) and hence, sales to non-Associated Enterprises after 2-2-2007 should have been ignored. It is also submitted that this aspect has not been considered by the I-T authorities despite specific attention being invited vide written submission and vide oral arguments during the proceedings. B)Adjustments sou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for Associated Enterprises and non-Associate Enterprise parties separately and chronologically. A perusal of the said workings reveals that the rates charged by the assessee company to the Associated Enterprises party vis-à-vis non-Associated Enterprises party were in close range. In fact, in many situations, the Associated Enterprise rates were slightly more / higher than the non-Associated Enterprises rates. The said bill-wise working was also supported with month-wise averages. The following situation prevails on a month-wise average basis working. Month Average rate charged to AE party (Rs. per KG) Average rate charged to non-AE party (Rs. per KG) April-06 No supply No supply May-06 No supply No supply June-06 No su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by the appellant before the DRP wherein, it was explained that, if the benchmarking is done transaction-by-transaction, no additions are warranted and so on. In this regard, we have observed the OECD commentary put forth by the learned Assessee's Representative and the relevant Para of the OECD commentary reads as under. A.3.1 Evaluation of a taxpayer's separate and combined transactions 3.9 Ideally, in order to arrive at the most precise approximation of arm's length conditions, the arm's length principle should be applied on a transaction-by-transaction basis. However, there are often situations where separate transactions are so closely linked or continuous that they cannot be evaluated adequately on a separate basis. Examples m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be compared with like. In fact, natural process of benchmarking itself calls for ignoring that period when, supplies are not made either to Associated Enterprises party or non-Associated Enterprises party. Further, if March-07 supplies are removed from the yearly benchmarking average, even yearly average rates become comparable and within the permissible 5% variation scope as follows. Particulars AE price (Rs. per KG) Non-AE price (Rs. per KG) Yearly average price 99=44 106=66 Apri-06 to Feb-07 average Price 99=44 103=28 In view of above, we do not feel propriety in sustaining the additions proposed by the TPO and sustained by the DRP. Accordingly, we allow the appeal of the assessee and direct the reven ..... X X X X Extracts X X X X X X X X Extracts X X X X
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