9911796707
TMI Blog2016 (4) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... s been decided by the tribunal. - Decided in favour of assessee - I.T.A. No. 137/Del/2016 - - - Dated:- 22-3-2016 - Shri R. S. Syal, Accountant Member And Shri Kuldip Singh, Judicial Member For the Appellant : Shri Mayank Jain, Shri Madhur Jain, Shri Parmatma Singh, Adv For the Respondent : Shri Amrendra Kumar, CIT DR ORDER Per R. S. Syal, AM This appeal by the assessee is directed against the final assessment order passed by the Assessing Officer (AO) u/s 143(3) read with section 144C of the Income-tax Act, 1961 (hereinafter also called the Act ) on 10.12.2015 in relation to the Assessment Year 2011-12. 2. First issue raised in this appeal is against the addition on account of transfer pricing adjustment amounting to ₹ 8,65,21,650/- towards international transaction of Job work . 3. Briefly stated, the facts of the case are that the assessee, an Indian company, incorporated on 01.12.2008, is engaged in the business of manufacturing and trading of gold and silver jewellery/ bars/coins and utensils etc. The assessee has its manufacturing unit located in Noida SEZ, which is eligible for benefit u/s 10A of the Act. M/s. Almowaiji Jewellers LLC ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being a simple job worker and also the application of Cost Plus method as the most appropriate method. During the course of proceedings before TPO, the assessee also came out with the application of Comparable Uncontrolled Price (CUP) method as the most appropriate method by giving comparable instances, which have been mentioned on page 7 of TPO s order viz., Mizan Co., Delhi with labour charges in US$ per gram of net weight @ US $ 0.21 to 0.52; Avisons Jewellers with labour charges @ US $ 0.43; and Meenakshi International with labour charges @ US $ 0.05 to 0.63. The assessee contended that labour charges paid to it by its AE @ US$ 0.65 per gram were higher than those charged by the above three comparables and hence at ALP. The TPO refused to accept the CUP as most appropriate method and opted for the Transactional Net Margin Method (TNMM) as the most appropriate method. He calculated the assessee s Profit Level Indicator (PLI) of Operating Profit/ Total Cost (OP/TC) at (-) 1.83% by including the amount of Sales along with Labour work charges as Operating revenue and also correspondingly taking, inter alia, the amount of `Raw material consumed , being the invoice value gold bar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llery. It is simply receiving gold bars from its AE, doing job work on them and then returning jewellery in the manner ordered by the AE, after charging for job work at US$ 0.65 per net gram of jewellery. Though certain entries have been made in the accounts books of the assessee recording purchase value and sale value at the time of receipt of gold and export of jewellery from/to its AE, but this recording of value as purchase/sale is not in the capacity as an owner. The assessee is simply receiving gold bars for converting them into jewellery and then sending it back to its AE after doing the specified job work. The entries have been made in the books of accounts to complete the formalities regarding receipt of gold from Dubai and then sending the jewellery to Dubai, which, as stated, is not possible without recording the value in invoices. Even though the assessee s AE has assigned invoice value but has neither treated the assessee as purchaser of its gold bars nor as seller of gold jewellery. Neither any payment whatsoever has been made by the assessee at the time of receipt of gold nor any amount has been received from its AE at the time of sending the jewellery back. The asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and circumstances for the instant year are admittedly similar to those of the preceding year, respectfully following the precedent, we hold that the CUP is the most appropriate method in so far as the international transaction is concerned. 9. The next issue is calculation of the ALP of this transaction under the CUP method. The assessee argued before the TPO that it received US$ 0.65 per net weight of jewellery as job charges, whereas the other job workers in jewellery under similar circumstances, have charged much less, as Mizan Co., Delhi, charging US$ 0.21 to 0.52 per gram of net weight and Meenakshi International charging US$ 0.05 to 0.63 per gram of net weight. These figures have been recorded on page 7 of the TPO s order. Similarly, the Assessing Officer has also recorded such figures in his final assessment order. None of the authorities has doubted or controverted the correctness of such figures or the comparability of these companies. When the comparable uncontrolled price charged by other job workers of gold jewellery from uncontrolled transaction is less than that charged by the assessee from its AE, such price charged automatically becomes its ALP. We find t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... By considering total weight of gold jewellery/bars carried away and applying 1% risk factor, with average price of ₹ 1851 per gram, the TPO computed `Financial risk to be compensated by the AE at ₹ 1,98,86,927/-. Receipt from the AE towards Insurance at ₹ 4,33,630/- was reduced from the above amount, which resulted into proposing transfer pricing adjustment of ₹ 1,94,53,297/-. The Assessing Officer proposed addition for this sum in the draft order. When the matter went before the DRP, it approved, in principle, the action of the TPO by holding that 1% was to be taken as value of services provided by the assessee. It was further noticed that the TPO had not reduced the amount received by the assessee from its AE in respect of the charges of freight and insurance. Accordingly, the TPO was directed : to reduce the reimbursement and limit the addition to the remaining amount . The Assessing Officer made the above addition in his final assessment order as the amount proposed by TPO was calculated after reducing the amount of insurance receipt by the assessee from its AE. The assessee is aggrieved against this addition. 12. We have heard rival submissions and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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