9911796707
TMI Blog2015 (10) TMI 468X X X X Extracts X X X X X X X X Extracts X X X X ..... nancial year in which international transaction has been entered into: provided that data related to period not being more than two years prior to such financial year may also be considered if such data reveals facts which could have an influence to transactions being compared. There in nothing in the provisions of Rule 10B(4) that data of subsequent years should be taken into to determine arm’s length price. In this factual and legal background, it is evident that method adopted by Assessing Officer to determine arm’s length price is not correct and not in accordance with transfer pricing regulation as existing in India. Accordingly, addition made by Assessing Officer by way of Transfer Pricing Adjustment on this account was rightly delete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 85,31,198/- on account of Transfer Pricing Adjustment. Assessing Officer made adjustment of ₹ 85,31,198/-. He noticed that assessee had suo moto made transfer pricing adjustment at ₹ 1,42,98,923/-. For this, assessee had taken, the profit at 9.65% as a benchmark on the basis of which transfer price adjustment has been made. Assessing Officer also noticed that assessee had shown gross profit ratio of 5.52% in the current assessment year whereas in the subsequent years i.e. A.Y. 2008-09 and 2009-10, assessee had shown gross profit @ 28.84% and 30.46% respectively. On this basis, Assessing Officer issued show cause notice as to why average gross profit ratio in the subsequent two years should not be taken as gross profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess and 13087 companies of capitaline. The assessee has selected the companies which were essentially engaged in manufacturing of pumps and valves. At the end of the above described search process, the company was left with one comparable company segment. From this one segment, the total comparable company was 14. From the above 14, companies assessee has eliminated companies having related party transaction which have an impact of the operating profit. Finally, the assessee has left with 5 comparable companies. On the above five, to determine the arm's length result, the assessee has taken arithmetic mean of margin of comparable companies and applied the same to the appropriate ways of the assessee. Sr. No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arriving at actual profit of the company is comparison of gross profit of the subsequent years of the assessee itself. The assessee has shown gross profit ratio of 28.84% and 30.46% in assessment years 2007-2008 and 2008-2009. The average gross profit comes to 29.65%. This 29.65% is the correct gross profit of the assessee. The assessee has shown gross profit at 5.52%. The difference comes to 24.13%. The gross profit accordingly comes to ₹ 2,28,30,121/-. However, the assessee has itself made transfer pricing adjustment at ₹ 1,42,98,923/-. Therefore, the difference of ₹ 85,31,198/- is added to the total income of the assessee. Penalty proceedings u/s 271(1)(c) of the Income-tax Act, 1961. 2.1 Matter was carried before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zing the comparability of an uncontrolled transaction with an international transaction shall be the data relating to the financial year in which the international transaction has been entered into: Provided that data relating to a period not being more than two years prior to such financial year may also be considered if such data reveals facts which could have an influence on the determination of transfer prices in relation to the transactions being compared. According to Provisions of Section Rule 10B(4), the data to be used in analyzing the comparability of uncontrolled transaction with an international transaction shall be data relating to financial year in which international transaction has been entered into: provided that dat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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