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TMI Blog2015 (2) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... t the addition on account of Transfer Pricing Adjustment from international transaction of 'Sale of finished goods' valued at Rs. 11,80,09,913/- 3. Briefly stated the facts of the case are that the assessee is an Indian subsidiary company of Illinois Tool Works Inc. The holding company has worldwide presence in the field of manufacturing of highly engineered products and specialty items. The assessee is engaged in manufacturing and sale of steel strapping/industrial packaging machines and consumables, quality assurance products, mechanical systems and components and specialty chemicals, aluminum insulation jacketing etc. The assessee applied the Transactional Net Margin Method (TNMM) on entity level for demonstrating that all of its inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vant material on record. In so far as the application of the most appropriate method for determining the ALP is concerned, we find that the assessee's adoption of combined TNMM on an entity level in respect of six separate sets of distinct international transactions - Purchase of raw material, Purchase of plant & machinery, Commission expenses, Sale of finished goods, Commission income and Reimbursement of expenses - is not capable of acceptance. Section 92(1) provides that : 'Any income arising from an international transaction shall be computed having regard to the arm's length price.' The mandate of this section is to determine the ALP of 'an' international transaction. The term 'transaction' has been defined under rule 10A(d) to mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al transaction. 7. The objection of the ld. AR is restricted only to the adoption of price charged by the assessee from non-AEs for comparison with the international transactions given at serial nos. 6, 7 and 9 of the Table. To explain the assessee's objection, we are taking up the transaction at serial no. 6. The product sold by the assessee to its AE is STX 00016 @ ` 8264/- per unit. On the other side of the Table, the TPO has taken comparable uncontrolled transaction with non-AE, namely, Cmt Spinning Mills Ltd., Mauritius with the price at ` 9668/- per unit. That is how difference of Rs. 1404/- (Rs. 9668/- minus Rs. 8264/-) per unit has been proposed as transfer pricing adjustment. Here, it is relevant to note that the TPO has compared ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r functions performed by such persons etc. The first proviso to subsection (2) of section 92C provides that : 'where more than one price is determined by the most appropriate method, the arm's length price shall be taken to be the arithmetical mean of such prices'. Rule 10B(1)(a) deals with the determination of Arm's Length Price under the CUP method. Sub clause (i) of Rule 10B(1)(a) provides that; 'the price charged or paid for property transferred or services provided in a comparable uncontrolled transaction, or number of such transaction, is identified'. When we consider the mandate of section 92C in conjunction with that of rule 10B, it transpires that if there is a single comparable uncontrolled transaction, then the price in such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the international transaction of 'sale of finished goods' in accordance with our above directions concerning the items at serial nos. 6, 7 and 9 of the Table given in the TPO's order. No other aspect of the determination of the ALP of this international transaction was challenged before us. Thus, on all other issues, the TPO's order should be taken as final. Commission Expenses 11. The second international transaction which is disputed in the present appeal is commission payment by the assessee amounting to Rs. 77,00,402/- to its AEs. The assessee benchmarked this transaction again on entity level under the TNMM. The TPO refused to accept the application of the TNMM in this manner and proceeded to determine the ALP of this transaction unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in of the AO. In that case, it was observed that the E-mails considered by tribunal from Mr. Braganza and Mr. Choudhary dealt with specific interaction and related to benefits obtained by assessee, providing a sufficient basis to hold that benefit accrued to assessee. Since the details of specific activities for which cost was incurred by both AEs (for activities of Mr. Braganza and Mr. Choudhary), and attendant benefits to assessee were not considered, the Hon'ble High Court remanded the matter to file of concerned AO for an ALP assessment by TPO, followed by AO's assessment order in accordance with law considering the deductibility or otherwise as per section 37(1) of the Act. 13. When we advert to the facts of the instant case, it is fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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