9911796707
TMI Blog2017 (8) TMI 1355X X X X Extracts X X X X X X X X Extracts X X X X ..... f the case and in law, the Ld.CIT(A) has erred in deleting the addition of Rs. 9,69,43,894/-/- made on account of Arm's Length Price. 2. The appellant craves leave to add, alter or amend any ground of appeal raised above at the time of hearing. It is prayed that the ord4er of the ld-XX being contrary to the facts on record and the settled position of law, be set aside and that of the Assessing Officer be restored. 3. The assessee is, inter alia, engaged in rendering business support services to its associated enterprises ("AEs") Sogo Shosha group entities. The assessee renders the following services: a) Arranging meetings with prospective customers; b) Interacting with various government officials, industry specialists, potential customers, etc; c) Providing information to its AEs pertaining to economic, commercial and industrial data, customs and procedures, business trends, market conditions, etc; and d) Arranging for feasibility studies, industry analysis, and project evaluation for potential projects identified by the AEs. Sogo Shosha means general trading companies. It is a form of industrial organization, a kind of vertically integrated trading companies in Ja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22,520/- for A.Y. 2007-08 and Rs. 9,69,43,894/- for A.Y. 2008-09 4. Being aggrieved by the TPO/AOs order, the assessee filed appeal before the CIT(A). The CIT(A), vide order dated October 30, 2012 for AY 2007- 08 and 2008-09 held that the Assessee is engaged in the business of rendering business support services and is not a trader. Further, relying on the order of the ITAT in case of GAP International Sourcing India Private limited (ITA No. 5147/Del-2011 and 228/Del-2012), the CIT(A) held that the FOB value of goods sourced by AEs cannot be included in the cost of the Assessee. The CIT(A) also upheld the use of comparables selected by the Assessee in its TP documentation. The CIT(A) held that the international transactions were at arm's length since the margin of the Assessee computed at 110.91% and 123.52% respectively for the AYs were higher than the mean margins of the comparables with current year data, submitted before the TPO by the Assessee, which were 16.91% (for AY 2007-08) and 15.24% (for AY 2008-09). Now the department is in appeal. 5. The Ld. DR relied upon the orders of the TPO & the AO and submitted that the TPO rightly held that the business profile of assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assumed limited risks and did not bear any risk in the nature of credit risk, price risk, inventory risk, storage and handling risk, etc. The Assessee has not developed any intangibles or accorded locational savings to its AEs. Locational savings are effected by the third party buyer who purchases the goods from the AEs. It can be seen from the TP documentation that the Assessee has been adequately compensated since, it has earned a net operating profit margin on cost of 110.91% and 123.52% against the arithmetic mean of the margins of comparable companies at 15.29% and 15.28% for AY 2007-08 and 2008-09, respectively. The provisions of the law do not warrant such Inclusion of costs which do not form part of the Assessee's operating cost and is artificial enhancement of the cost base of the Assessee. The Ld. AR submitted that the TPO has erred in re-characterizing the business functions 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 under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IPL in its TP documentation and proposed a set trading companies as comparables. * In order to compensate IIPL, for its efforts, the TPO proposed an addition of 2.53% (average net margins of trading companies) mark-up of FOB value of exports made by India manufacturer to overseas third party customers. The Ld. AR further submitted that the CIT(A) appreciated the functional and risk profile of the Assessee and held that the TPO has erred in treating the Assessee as a trader and including the FOB value of goods sourced in the operating cost of the Assessee. The Ld. AR further submitted that the Hon'ble ITAT in Li Fung's own case for AY 2007-08, 2008-09 reported at [2014] 63 SOT 61 (Del) and 2009-10 reported at [2016] 178 TTJ 10 (Del), following the judgment of the Hon'ble Delhi High Court held that the base of 'total cost' as adopted by the TPO and approved by 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
