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TMI Blog2014 (11) TMI 1036X X X X Extracts X X X X X X X X Extracts X X X X ..... earned TPO granted this benefit to the assessee with regard to the automotive component segment, it cannot be denied qua, this claim also, if the adjustment falls within the range provided in the proviso. The Assessing Officer shall look into these aspects and if so require can take the help of the TPO. - I.T. (TP) A No. 1401/Bang/2010 - - - Dated:- 14-11-2014 - Rajpal Yadav, Judicial Member and Jason P. Boaz, Accountant Member Ajit Tholani for the Appellant Farhat Hussain Qureshi for the Respondent ORDER Rajpal Yadav, Judicial Member:- 1. The assessee is in appeal before us against the assessment order dated 30.09.2010 passed u/s. 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961, passed for A.Y. 2006-07. The assessee has taken five grounds of appeal, however, the ld. Counsel for the assessee at the time of hearing restricted the grievance of the assessee to the extent that the ld. A.O. has erred in confirming the addition of ₹ 2,10,95,333/- by making adjustment in the Arm's Length Price (ALP) of the international transaction entered with the Associated Entrepreneurs (AEs). He also pleaded that the ld. A.O. has erred in not granting the benefi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st (ALP) @ 86.68% of operating revenues Rs.86,66,04,103 7.4.1 Price received vis- -vis the Arms Length Price The price charged by the tax payer to its Associated Enterprises is compared to the Arms Length price as under:- Arms Length Cost @ 86.68% operating revenues (a) Rs.86,66,04,103 Operating cost (including the purchases made from AEs) (b) Rs.93,82,88,000 Purchases made from AE (c) ₹ 9,75,04,096 Cost with unrelated parties (d) = (b) (c) Rs.84,07,83,904 Arm s length cost of the purchases made (e) = (a) (d) ₹ 2,58,20,199 Excess payment being adjustment u/s 92CA (f) = (c) (d) ₹ 7,16,83,897 The above shortfall of ₹ 7,16,83,897/- is treated as transfer pricing adjustment u/s. 92CA. Based on the above detailed discussion, the arm's length price of the international transactions pertaining to purchases made from the AEs in the textile machinery segment is determined as above resulting in an adjustment to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stment ought to be made in the value of international transactions. In his second fold of submissions, he contended that the adjustment ought to have been confined to the value of transactions the assessee has entered with its AEs. The TPO in his order dated 29.10.2009 has admitted that the assessee had made purchases from the AE of only ₹ 9,75,04,096/- whereas the purchases from unrelated parties were made of ₹ 84,07,83,904/-, on the purchases made from unrelated parties, there could not be any adjustment because there could not be any undue benefit extended by the assessee to its AE. The very formula adopted by the TPO is erroneous. The adjustment should be restricted qua the purchases made from the AE, he filed the details in tabular form and contended that the adjustment at the most could be of ₹ 21,92,164/-, instead of ₹ 2,10,95,333/-. This adjustment would fall within the ambit of (+-) benefit extended to an assessee and therefore, there could not be any addition which could be made. For buttressing his contentions, he relied on the order of the ITAT in the case of Polartech India (P) Ltd. v. Asstt. CIT 2013 156 TTJ 0659. He took us through Paragraph N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... component segment, the TPO has himself given the benefit of this proviso. The contention of the learned DR was that this argument was not taken up by the assessee before the learned TPO. Therefore, it be remitted to the TPO for verification and re-adjudication. However, we find that in the TP study report, the assessee has disclosed the details of purchases in textile machinery segment from the AE. These are available on page 47 of the TP study report and they read as under:- The details of the international transactions entered by KTTM with its associated enterprises during the financial year 2005-06 are as follows:- Name Address of the Associated Enterprise Description of the Transactions Payment Amount (Rs.) Receipt Amount (Rs.) Toyota Industries Corporation, Japan 2-1 Toyoda-cho, Kariyashi, Aichi 448 Japan Purchase of raw materials and components 97,504,096 Purchase of Capital Goods 889,684 Payment towards trade mark ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actions forming part of operational cost to the total operational expenses of the enterprise as a whole. We find that the adjustment made by the TPO for this purpose is not correct. 32. We find support of this view in the Delhi Tribunal fL Jin Electronics (1)(P) Ltd. us. Asstt. CIT 2010 36 SOT 227 (Del) as under:- The assessee has also taken one alternative ground out of the total raw materials consumed by the assessee for manufacturing printed circuit boards, only 45.51 per cent of the total raw materials were imported through assessee's associate concerns, and, therefore, any adjustment, if any called for, can only be made to the 45.51 per cent of the total turnover, and not to the total turnover of the assessee. After considering the facts of the case, we do not find any difficulty in accepting this contention of the assessee that at best only 45.51 per cent of the operating profit can be attributed to imported raw material acquired from assessee's associate concerns. In the present case, the A.O. has calculated the operating profit on the entire sales of the assessee, which in our considered opinion, is not justified, when it is admitted position that only 45.51 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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