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TMI Blog2015 (11) TMI 269X X X X Extracts X X X X X X X X Extracts X X X X ..... the Transfer Pricing Officer wrongly came to the conclusion that leverage of 5% is not allowable to the assessee’s case where once price based on a particular method of arm’s length price is not applicable. Accordingly, we are in complete agreement with the claim of the assessee with regard to benefit for the adjustment of + 5% variation, while computing the arm’s length price. This ground of the assessee is allowed. The transfer pricing officer is not justified in comparing with the average price published by the cashew bulletin of cashew export council with that of price mentioned in individual transaction for the products. Accordingly, we direct the TPO to compare the average monthly price to the product published in cashew bulletin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER This appeal by the assessee is directed against the order of the Commissioner of Income-tax (Appeals)-V, Chennai, dated 02.09.2013 for the assessment year 2009-2010. 2. The Commissioner of Income Tax (Appeals) has raised the following grounds:- 2.1 The learned Assessing Officer has erred in adding C77,58,955/- towards adjustment in Arms Length Price, determined by TPO as per the orders of the latter dated 31.12.2012. 2.2 The learned TPO erred in determining Arms Length Price of the AE purchase at C37,13,20,434/- as against C37,90,79,389/- admitted by assessee. 2.3 The learned TOP erred in not correctly appreciating the contents of 2nd proviso and Explanation there un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Commissioner of Income Tax (Appeals). 4. The Commissioner of Income Tax (Appeals) observed that the deduction of purchase price by C77,58,955/- by the Assessing Officer based on the Transfer Pricing Officers order determined the Arm s Length Price (ALP) of the Associated Enterprise purchased from M/s. Padworth Company Pvt. Ltd. As per the provisions of Sec.92CA(4), the Assessing Officer on receipt of order u/s.92C (3) computed the total income of the assessee under sub-section (4) of 92C. The Assessing Officer s computation of total income of the assessee is based on the Arms Length Price determined by the TPO and accordingly an addition of C77,58,955/- is made. As the Assessing Officer has followed the TPO order following the total va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Provided further that if the variation between the arm s length price so determined and price at which the international has actually been undertaken does not exceed fiver per cent of the latter, the price at which the international transaction has actually been undertaken shall be deemed to be the arm s length price . 6. In our opinion, the second proviso to be read independently. The lower authorities instead of following above second proviso followed the first proviso. Being so, the Transfer Pricing Officer wrongly came to the conclusion that leverage of 5% is not allowable to the assessee s case where once price based on a particular method of arm s length price is not applicable. This view of us was also supported by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per the Transfer Pricing Officer an amount of C39,80,5311- pertains to Interest on the credit period availed by the assessee from Associate Enterprises (AE). The AE during the period has exported all the consignments to the Unrelated Parties on immediate payment terms either by cash or by way of Letter of Credit. The assessee also produced before the Assessing officer a few transactions related to unrelated parties as proof. However, the assessee has imported Raw Cashew at an average credit term of 150 days from the AE . The assessee did not avail any working capital loan from the Banks and the entire requirement of Working Capital was met by the Credit term extended by the AE. Accordingly the assessee has computed interest on all the impor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have heard both the parties and perused the material on record. The contention of the ld. Departmental Representative is that for importing cashews from its Associated Enterprises from Benin, the assessee paid more than the price mentioned in the CEPC Journal (External data), so the Assessing Officer made transfer price adjustment. The plea of the assessee is that the assessee availed 150 days credit for payment. Being so, the price was charged little more than the rate mentioned in the CEPC Journal (External data). If due credit is given to interest @12% for the credit period, there is no necessity for TP adjustment. This plea of the assessee is correct. In our opinion, due weightage is to be given towards interest benefit enjoyed by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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