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TMI Blog2018 (3) TMI 536X X X X Extracts X X X X X X X X Extracts X X X X ..... finished goods sold to the third parties are not comparables to the prices at which the goods sold to the AEs on the FAR analysis. Finished goods are customized goods and the geographical differences, volume differences, timing differences, risk differences and functional differences, came to a conclusion that the CUP method would not be the MAM to determine the ALP. It upheld the stand of the respondent assessee that TNM method is the MAM to arrive at ALP. Thus, the view taken by the Tribunal on the facts before it, is a possible view on the application of appropriate tests. Revenue has not shown that the selection of TNM method as the MAM to determine the AL of export to AEs is perverse. Differentiating CUP analysis on the basis of ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions to determine the ALP of the export sales to AEs.? (ii) Whether on the facts and circumstances of the case and in law, the Tribunal was justified in differentiating CUP analysis on the basis of geographic difference and volume difference in respect of sale commission, especially when the commission is earned on the basis of percentage of sales? 3. The impugned order of the Tribunal allowed the respondent assessee's appeal from the orders of the Assessing Officer under Section 143(3) r/w 144C of the Act i.e. in terms of the directions of the Dispute Resolution Panel (DRP). It upheld that the Transactional Net Margin Method (TNM method) for determining the Arm's Length Price (ALP) in respect of the transactions (sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 27.24 crores. However, only in respect of exports amounting of ₹ 1.40 crores, the TPO was of the view that as there are similar products which have been sold by the assessee to the third parties at higher prices then to the AEs on the aforesaid export of ₹ 1.40 crores. Therefore, the ALP has to be determined on application of CUP method. With the result, the TPO made an addition on the approximately 5% of the total exports i.e. ₹ 1.40 crores by applying CUP method only on the basis of similarities of goods sold to AEs and third parties. (c) In appeal, the Tribunal in the impugned order on analysis found that the finished goods were customized. It found on facts various differences between the finished goods sold to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t FAR analysis has to be carried out, does not indicate that it was carried out. On the contrary, we find that the Tribunal in the impugned order has done the necessary FAR analysis. This is so as it has compared the risk and functional differences involved in finished goods being sold to AEs as against those sold to third parties as we have enumerated above to come to the conclusion that the prices at which the finished goods sold to the third parties are not comparables to the prices at which the goods sold to the AEs inter alia on the FAR analysis. We note that the finished goods are customized goods and the geographical differences, volume differences, timing differences, risk differences and functional differences, came to a conclusion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which are performed and the rate of commission paid by the respondent to the AEs as well as to the third parties. This was evidenced by the fact that the rate of commission paid varies from 1% to 7% depending upon the services rendered by the AEs in respect of the sales made. The impugned order of the Tribunal finds on facts that the functions performed by the AEs for which they paid sales commission was much wider than that performed by non AE agents. Further, the comparison of sales commission paid on sales made in India to sales commission paid to sales made abroad would in view of the geographical differences and differences in the functions performed result in the TNM method and not the CUP method as the MAM to determine the ALP of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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