2016 (3) TMI 459

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..... g regard to capital employed as a base. In the present facts, as correctly emphasized by the Tribunal, there is a common pool of capital used both for International Transaction with AE's and also others. Thus, in the absence of identification or segregation of capital employed with regard to AE's transaction and those with others, the RoCE method would not indicate the appropriate margin for determining the ALP. Thus, the RoCE method has not been accepted by the Tribunal to determine the ALP. Further, even before us, as also before the Tribunal, the Revenue has not been able to show any determination of margin by RoCE method to arrive at the ALP of International Transactions in the Respondent-Assessee's industry. View taken by the Tribun .....

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..... overall margins are less than arm's length margins, the short fall must be on account of AE transactions only and not on pro rata basis? 3 Regarding Question (a) : (a) The Respondent-Assessee is engaged in the business of manufacturing, importing and exporting jewellery. As the Respondent-Assessee had entered into International Transaction with its Associated Enterprises (AE), a reference was made by the Assessing Officer to the Transfer Pricing Officer (TPO) to determine the Arms Length Price (ALP) of such International transactions. The TPO adopted the Transactional Net Margin Method (TNMM) as had also been done by the Respondent-Assessee. However, the base applied was capital employed by the TPO to determine the Profit Le .....

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..... dent-Assessee where the TC or Total sales was applied as base to determine the PLI. In the above view, the Tribunal directed the application of TC as the base to arrive at the PLI under the TNMM for determining the ALP; (d) Mr. Pinto, learned Counsel appearing for the Revenue submit that the business of the Respondent is a capital intensive industry i.e. diamond and jewellery. In such cases, it is submitted that RoCE would be the most appropriate method. However, the reasoning of the Tribunal for not adopting the RoCE Method in the present facts has not disputed and no attempt to show it to be fallacious is even made. (e) We find that in terms of Rule 10B1( e) (i) of the Income Tax Rules, it is open for the authorities to determine th .....

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