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TMI Blog2016 (8) TMI 1431X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee while determining the ALP - HELD THAT:- An assessee shall not be entitled to exercise its option as referred to in the proviso to sub-section (2) if the variation between the arithmetical mean and the price at which such transaction has actually been undertaken exceeds five per cent. of the arith metical mean. In view of the retrospective operation of the aforesaid provision, the benefit of ± five per cent as a standard deduction cannot be allowed. In other words, if the variation of arithmetic mean is within the range of ±5%, then the assessee is entitled for benefit of ±5% under the proviso to Sec.92C(2) - we direct the TPO to allow ±5% it, it is within the range of ±5%. Ordered accordingly. Non providing any adjustment to arm’s length margin of Comparable Companies on account of differences in Research & Development and Marketing activities - HELD THAT:- The assessee sales only to AE and only job work, no work is involved. Hence by placing reliance with the order of Hyderabad Bench in the case of DCIT Vs. Hellosoft India Pvt. Ltd. [2013 (10) TMI 747 - ITAT HYDERABAD] we direct the AO to grant risk adjustment of 1% towards Research and Development. Appeal of as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e DRP ought to have appreciated that merely because the Appellant has considered Ador Multiproducts Limited and Ajanta India Limited at enterprise level does not pre-empt the DRP from passing a direction in accordance with law to consider segmental margins of the said Comparable Companies, more so when the said analysis was submitted during the course of assessment proceedings under section 92CA(3) of the Act. 2.7 The TPO and the DRP erred in not allowing the benefit of range of +1- 5% as provided in proviso to Section 92C(2) of the Act to the Appellant, while determining the arm s length price. 2.8 The TPO ought to have considered the provisions for arm s length range of +1- 5% variations as per the provisions of the Finance Act relevant to Assessment Year 2007-08. 2.9 The DRP/TPO erred in not providing any adjustments to the arm s length margin of Comparable Companies on account of differences in Research Development and Marketing activities. 2.10 The DRP and TPO ought to have appreciated that TP is an anti-avoidance mechanism and when the Appellant is eligible for tax holiday benefits under section 1 OB of the Act, the DRP/TPO ought to have appreciated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justment should not be rejected. The TPO did not accept the assessee s reply and recomputed the assessee s PLI as under rejecting the adjustment of forex loss and the financial charges. Margin Analysis of SSL-TTK Ltd. Financial Year ended 31st March, 2007 Particulars Rs. Rs. INCOME 1,108,883,010 Sales Turnover 5,827,391 Excise duty 1,103,055,619 Net sales (31,913,167) Stock Adjustments 12,394,212 Other Income 1,083,536,664 EXPENDITURE Raw materials 953,742,201 Manufacturing other expenses 136,838,137 Depreciation 10,365,214 Interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uded that the transactions had not been made at arm s length and an adjustment was required. Against the order of TPO, the assessee filed objections before the DRP. 3.2 The DRP after perusing the order of TPO and transfer pricing documents upheld the order of TPO in upward transfer pricing adjustment to international transaction of export of foot care products by the assessee to AE. Before the DRP, the assessee challenged the inclusion of Amar Remedies Ltd., on the reason that it has a data financial year ending and it cannot be considered as comparables. Further, regarding Ador Multi Products, it was stated that only segmented data is considered as is engaged in the trading and personal care products. The same argument was placed regarding Ajanta India stating that only segmented data will be considered. The assessee also has taken a plea before the lower authorities, the risk adjustment to be given as it is supplying only to AE and risk involved is less. However, the DRP concurred with the findings of the TPO and not given any relief to the assessee. Consequently, the assessment order passed u/s.143(3) r..w.s.93C(14). Against this direction of the DRP, the assessee is in appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year and the variation between the arithmetical mean referred to in the said proviso and the price at which such transaction has actually been undertaken exceeds five per cent of the arithmetical mean, then, the assessee shall not be entitled to exercise the option as referred to in the said proviso. The aforesaid provision makes it clear that an assessee shall not be entitled to exercise its option as referred to in the proviso to sub-section (2) if the variation between the arithmetical mean and the price at which such transaction has actually been undertaken exceeds five per cent. of the arith metical mean. In view of the retrospective operation of the aforesaid provision, the benefit of five per cent as a standard deduction cannot be allowed. In other words, if the variation of arithmetic mean is within the range of 5%, , then the assessee is entitled for benefit of 5% under the proviso to Sec.92C(2) of the Act. The above view is fortified by the order of Delhi Tribunal in the case of ACIT Vs.UE Trade Corportion (India) Pvt Ltd., reported in (2011) 136 TTJ 297(Del.) Accordingly, we direct the TPO to allow 5% it, it is within the range of 5%. Ordered accordingly. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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