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TMI Blog2016 (5) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... is at arm’s length. We are not adjudicating the issue of total turnover versus turnover with the AE and the related issues - Decided in favour of assessee X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 for arriving at PLI. The PLI was worked as under: SN. Company Name FY. 2006-07 FY . 2007-08 FY. 2008- 09 Weighted Average Operating Margin 1. Indokem Ltd. 6. 32 -0. 46 NA 2. 93 2. Jayasynth Dyestyff (India) Ltd. -1. 80 5. 15 NA 1. 67 3. Mahalaxmi Dyes & Chemicals Ltd. 0. 59 2. 61 NA 1. 60 4. Vipul Dye Chem Ltd. 4. 86 5. 29 NA 5. 08 Average 2. 82% PLI of the assessee 1. 12% During the course of TP proceedings the assessee was called upon to update the margin of the above four comparable companies using AY 2009-10 data on standalone basis. The assessee vide its letter dt. 7. 11. 2012 submitted the updated margin for the AY 2009-10 was as under : Sr. No. Company Name Updated PLI using data for FY 2008 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ministrative overheads that the assessee was a trader that the principal transactions were of purchase and sale of finished goods. The TPO conducted a fresh search and identified four comparables namely Hard Castle and Waud Mfg Co. Ltd. Castrol India Ltd. Hindustan Petroleum Ltd. and Indian Oil Corpn. Ltd. He required assessee to furnish a detailed reasoning so as to why the above referred 4 companies should not be considered as valid comparables. Vide its letter dt. 11. 1. 13 the assessee made elaborate submissions before the TPO. After considering the comparables selected by the assessee the TPO selected final set of comparables. The final comparables were as under :- SN. Company Name Functions Margins as per assessee computed from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... national transaction on purchase and sale of finished goods purchase of SAP license commission income cost sharing expenses were inexplicably linked to its trading activities that same had to be bench marked on an aggregate basis considering the TNMM as the most appropriate method that it had consistently benchmarked its transaction with the AEs on an aggregate basis adopting TNMM that the TPO had accepted the method and benchmarking in the earlier years that the TPO had failed to appreciate that given the limitation of applicability of RPM it was not the most appropriate method for benchmarking that the assessee had conducted a contemporaneous scientific study to arrive at a final set of comparables that the TPO had used current data base ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justified in rejecting entity level benchmarking that the TPO had used the identical key words for finding out a set of four comparable for the benchmarking at the entity level of transactions that there was no value addition at the level of the assessee that the RPM was the most appropriate method to benchmark international transaction relating to purchase and sale of finished goods that the assessee had adopted ex-post approach that it could not constrain the TPO to use the data that was available at the time of TP study. Referring to the provisions of section 92CA r. w. s. 92C(3)of the Act it was held that those sections empowered the TPO to determine the ALP on the basis of such material which was available to him that non availability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... related with purchase and sale of finished goods were to be benchmarked separately that the TPO used RPM for determining the ALP of the transact - ions that in the earlier years the assessee had benchmarked the international transactions on an aggregate basis adopting TNMM for earlier years and the AO had accepted the method for the purpose of benchmarking that the TPO had considered eight comparables as the final set that the assessee had submitted a chart and had claimed that correct gross margin of comparable companies should have been 19. 35% instead of 31. 68% that the gross margin of the assessee was 28. 45% . We find that the assessee had filed an application u/s. 154 of the Act before the TPO to rectify the mistakes in his order tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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