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TMI Blog2017 (8) TMI 1355X X X X Extracts X X X X X X X X Extracts X X X X ..... g profit margin on cost of 110.91% and 123.52% for AY 2007-08 and 2008-09, respectively. Computation of an adjustment (over and above the existing remuneration) to the tune of INR 6,53,22,520 and INR 9,69,43,894 by the TPO for the relevant AYs, has required the Assessee to earn an NCP of 202.35% and 246.09% for AY 2007-08 and 2008-09, respectively is practically impossible to achieve. These contentions taken by the Ld. AR are accepted. The Revenues appeal agitating the issue of deletion of the addition made on account of Arms Length Price related to FOB value of cost is similar to the case of GAP International Sources India Pvt. Ltd. [2012 (9) TMI 766 - ITAT DELHI] - Decided in favour of assessee. - I.T.A .No. 6287/DEL/2012, I.T.A .No. 6288/DEL/2012 - - - Dated:- 18-8-2017 - SHRI N. K. SAINI, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER Appellant by Sh. Vishal Kalra, Adv Ms. Reena Malik, CA Respondent by Sh. Sanjay Kumar Yadav, Sr. DR Sh. T. M. Shiv Kumar, CIT DR ORDER PER BENCH These appeals are filed by the Revenue against the order dated 30/10/2012 passed by CIT(A)-XX, New Delhi for Assessment Year 2007-08 2008-09 respectively. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then perform the decision making and purchase valuation functions. Further, the Assessee forwards the bid documents to the vendors, if such bid is accepted then the AEs enter into a purchase transaction with the vendor. Post the purchase of goods from suppliers, the AEs identify potential customers for goods purchased from the vendors and sells the same to third party customers. The Assessee's functions are limited to identifying the prospective sellers in India. The Assessee's approach at the time of Transfer Pricing (TP) Documentation: A.Y 2007-08 A.Y 2008-09 Value of transactions (INR) : 13,48,00,480 15,32,52,830 Method adopted for benchmarking Transaction Net Margin Method( TNMM ) TNMM Profit Level indicator Net operating profit Margin on cost ( NCP ) NCP No. of comparables 13 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of ₹ 9,69,43,894/- in relation to the international transactions entered into by the assessee. The Ld. DR further submitted that the TPO rightly rejected the Transfer Pricing Analysis undertaken by the Assessee and made addition to the income of the assessee by including the FOB price of the goods sourced by the assessee's AE in the operating cost of the assessee while computing operating margins of the assessee. The Ld. DR further submitted that the CIT(A) erred in deleting the addition on account of Arms' Length Price. 6. The Ld. AR furnished a chart and explained the approach of all the authorities with the issues contested in the present appeals for subsequent years as under: A.Y TPO CIT(A) Remarks 2007-08 TPO proposed a Transfer Pricing adjustment amounting to INR 6,53,22,520/- CIT(A) rejected the TPO assessing the case for A.Y 2007-08 and A.Y 2011-12 is same. Revenue authorities filed an appeal before the ITAT impugned approach Of TPO and deleted Adjustment proposed by The TPO on account of Transfer Pricing. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the Assessee to be that of a trader. The TPO failed to appreciate that the Assessee has not undertaken the activity of purchase and resale. Further, the companies adopted by the TPO as comparable are undertaking trading operations which is not comparable to the inter-company transactions undertaken by the Assessee. The TPO has artificially enhanced the cost base on the Assessee and proposed a mark-up on the FOB value of goods sourced by AEs, such approach does not correspond to any one of the five methods, as provided under the ACT. Further, the Assessee has earned a net operating profit margin on cost of 110.91% and 123.52% for AY 2007-08 and 2008-09, respectively. Computation of an adjustment (over and above the existing remuneration) to the tune of INR 6,53,22,520 and INR 9,69,43,894 by the TPO for the relevant AYs, has required the Assessee to earn an NCP of 202.35% and 246.09% for AY 2007-08 and 2008-09, respectively which is practically impossible to achieve. 6. The Ld. AR relied upon the Hon'ble Delhi High Court judgment in case of Li and Fung India Pvt. Ltd. Vs. CIT (2014) 361 ITR 85 (Del) wherein it is held that the approach of TPO to enhance the assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y DRP in considering the FOB value of goods between the third party enterprises cannot be accepted. The Ld. AR submitted that the order of the ITAT in case of GAP International Source India Pvt. Ltd Vs. ACIT 25 Taxman.com 414 (Delhi) has been confirmed by the Hon'ble High Court by dismissing the appeal of the Revenue. 8. We have heard both the parties and perused the material available on record. The CIT(A) has rightly relied upon the decision taken by the Tribunal in case of GAP International Sourcing India Pvt. Ltd wherein the Revenue has filed appeal before the Hon'ble High Court which is dismissed vide order dated 29/1/2016. The Ld. AR also pointed out that in subsequent years the TPO has accepted the said contentions and granted the relief related to FOB as per the decision of GAP International LI Fung India Pvt. Ltd. The case laws referred by the Ld. AR are having similarity on the factual aspect with the assessee company herein. Itochu Corporation, Japan ( ICJ ) is a trading organization in Japan and is engaged in trading of various products such as textiles, machinery, information and communications related products, meals, products related to oil and other e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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