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TMI Blog2016 (4) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... or benefit u/s 10A of the Act. M/s. Almowaiji Jewellers LLC (Almowaiji), a Dubai based company, engaged in the trading and manufacturing of gold and other jewellery items, is assessee's associated enterprise (AE). The assessee showed to have purchased pure gold bars of .999 or .995 fineness on `Free of Cost' (FOC) basis from Almowaiji. Such pure gold apparently shown to have been purchased by the assessee from its AE was converted into jewellery and sold back to its AE. The assessee reported two international transactions in Form no. 3CEB viz., 'Import of bullion' with transacted value of Rs. 94,77,32,257/- and `Export of gold jewellery' with transacted value of Rs. 94,42,78,354/-. The assessee benchmarked these international transactions by using the Cost Plus method as the most appropriate method for determining their Arm's Length Price (ALP) by taking CIF value in terms of Costs of gold content as per Bill of entry + Labour charges (at predetermined rates) + Freight + Insurance. The assessee mentioned in its Transfer pricing study report that Almowaiji sends pure gold of required fineness on FOC basis to the assessee. Since gold has to leave the country of its origin, the invoic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial consumed', being the invoice value gold bars received from its AE. In other words, the TPO included value of gold imported and value of jewellery sold to its AE in the calculation of the assessee's PLI. Thereafter, he selected certain companies as comparable, which have been listed on page 41 of his order. Average profit margin of such companies was calculated at 7.14%. By applying this profit margin, the TPO worked out transfer pricing adjustment amounting to Rs. 8,65,21,650/-. That is how, the Assessing Officer made this addition as transfer pricing adjustment in his draft assessment order. The assessee remained unsuccessful before the DRP, which resulted into making of an addition of Rs. 8.65 crore and odd in the final assessment order, which has been assailed before us. 5. We have heard rival submissions and perused the relevant material on record. First issue disputed in the determination of the ALP of this international transaction is application of the most appropriate method. The assessee company initially applied Cost Plus method as the most appropriate method, but during the course of proceedings before TPO, it switched over to the CUP method. The transacted valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time of sending the jewellery back. The assessee is confined to receiving the instructions from its AE for manufacturing gold jewellery and then returning the same on receipt of its job charges. Thus, the sequence of events amply indicates that the assessee did not acquire ownership rights in gold bars at the time of its receipt and nor did it pass over the any title in the gold jewellery to its AE in Dubai at the time of sending back. 8. The ld. A.R. has brought to our notice the order passed by the Tribunal in assessee's own case for the immediately preceding assessment year 2010-11. A copy of such order is available on page 185 onwards of the Paper Book. In such earlier year also, no consideration was paid or received by the assessee for the value of gold and only labour charges were received, as is the position during the instant year as well. The Department gave similar treatment to the transactions in the preceding year as has been given during the current year. When the matter came up for adjudication, the tribunal refused to uphold the Departmental stand of purchase of gold bars by the assessee and the consequent sale of gold jewellery to its AE. Further observations have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... automatically becomes its ALP. We find that similar issue was also there before the Tribunal for the immediately preceding year as well. For that year also, comparable companies were Meenakshi International and Mizan & Co., being the same companies which have been discussed for this year as well. As the rates charged by these two companies were found to be less than that charged by the assessee, the Tribunal accepted the international transaction at ALP. 10. At this stage, it is pertinent to mention that the Revenue assailed correctness of this tribunal order before Hon'ble Delhi High Court. Vide its judgment dated 21.12.2015, a copy placed at page 315 onwards of the Paper Book, the Hon'ble High Court has upheld the Tribunal order by holding that it did not warrant any interference and no substantial question of law arises for determination from this order. In holding so, the Hon'ble High Court also discussed that the application of the TNMM, as used by the Revenue for benchmarking, was not appropriate and there was a detailed analysis by the tribunal in holding the issue in favour of the assessee. Thus, it is palpable that the Tribunal in the assessee's own case for t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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