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TMI Blog2019 (10) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... ying FAR analysis, it was held that where the finished goods were customized goods and the geographical differences, volume differences, timing differences, risk differences and functional differences were there, then CUP method would not be the most appropriate method to determine arm's length price. The TNMM method was held to be most appropriate method. In the totality of the above said facts and circumstances, where the issue stands covered by the order of jurisdictional High Court in the case of assessee itself, there is no merit in the orders of authorities below in making aforesaid transfer pricing adjustment in the hands of assessee both with respect to exports to associated enterprises and with respect to imports from associated enterprises. Majority of transactions have been accepted to be at arm's length price by the TPO by applying TNMM method, only in respect of few transactions, the TPO had applied CUP method. There is no merit in the order of TPO in this regard and reversing the final order passed by Assessing Officer, we allow the claim of assessee and direct the Assessing Officer to delete the transfer pricing adjustment made in the hands of assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred in making an addition of ₹ 2,97,46,406/- u/s. 92C on the basis of the order of the TPO u/s. 92CA(3) dated 18.01.2016 in the case of the appellant company. 2] The learned AO / DRP erred in making an adjustment of ₹ 2,96,64,875/- by adopting the Comparable Uncontrolled Price (CUP) Method for determining the Arm's Length Price (ALP) in respect of some of the international transactions pertaining to export of finished goods. 2.1] The learned AO / DRP erred in holding that the CUP method was the most appropriate method for determining the ALP in respect of some of the transactions of export of goods merely on the basis that the data pertaining to similar transactions with third parties were available. 2.2] The learned AO / DRP failed to appreciate that there were various differences on account of functional, transactional, geographical, volume, timing, business risks, etc. in respect of alleged comparable transactions which ought to have been considered and since suitable adjustments were not possible, there was no reason to adopt the CUP method for determining the ALP. 2.3] The learned AO / D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmits that the learned TPO / DRP failed to appreciate that in respect of certain products exported by the assessee, it had charged higher price to the AE as compared to non AE and hence, this amount should have been adjusted and only the net amount could be added. 5] Without prejudice to the above grounds, the assessee submits that the learned TPO / DRP failed to appreciate that in respect of certain products imported by the assessee, it had paid lesser price to the AE as compared to non AE and hence, this amount should have been adjusted and only the net amount could be added. 6] The learned AO / DRP erred in not appreciating that in the earlier years, Hon'ble ITAT had rejected the CUP method as the most appropriate method for determining the ALP of the international transactions of export of finished goods and import of goods and since all the facts are similar in this year, there was no reason to adopt the CUP method in this year for determining the ALP. 7] The learned AO / DRP has erred in disallowing an amount of ₹ 33,67,695/-, being a claim of additional depreciation u/s. 32(1)(iia) of the Act on Tooling, withou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal in assessment year 2009-10, wherein at page 11 vide paras 8 and 11, both issues in respect of transfer pricing adjustment have been decided in favour of assessee. He further referred to the decision of the Hon ble Bombay High Court placed at page 28 onwards of Paper Book relating to assessment years 2006-07 to 2008-09 and pointed out that the Hon ble High Court has held that CUP method in such scenario cannot be applied. The Hon ble High Court had affirmed the aggregation approach applied by the assessee and also in holding that TNMM method was most appropriate method. He then, pointed out that in case grounds of appeal No.2 and 3 are decided in favour of assessee, then grounds of appeal raised vide grounds of appeal No.4 to 6 would become academic in nature. Vis- -vis ground of appeal No.7, it was case of assessee that it was engaged in the manufacture of connectors and had purchased certain tools, which admittedly were part of plant machinery. The assessee had sought additional depreciation under section 32(1)(iia) of the Act. However, the Assessing Officer had disallowed the claim of assessee. He further pointed out that while disallowing the same, the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arlier year has been decided by the Tribunal in favour of assessee. However, since the Department has preferred an appeal to the Hon ble Bombay High Court for assessment years 2005-06 and 2006-07 to 2008-09, the plea of assessee was not accepted. Further, in respect of imports from associated enterprises, the TPO noted that the said raw materials were used for manufacture and also sold to third party and associated enterprises. On total turnover of about ₹ 41 lakhs, the TPO suggested an upward adjustment of ₹ 81,531/-. 7. We find that similar issue has arisen in the case of assessee starting from assessment year 2005-06. The Tribunal vide order dated 06.11.2015 in ITA No.449/PN/2014, relating to assessment year 2009-10 on similar issue had referred to the order of Tribunal in earlier years relating to assessment years 2006-07 to 2008-09 decided vide consolidated order dated 30.05.2014 and had extensively deliberated upon the issue whether CUP method is to be applied for benchmarking international transactions of assessee and / or whether the assessee was correct in aggregating the transactions under the head Manufacturing Segment and by applying TNMM m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, there was no reason why for balance of export of finished goods, TNMM method should not be applied. Similar direction was also given in respect of imports of finished goods, which were sold to third parties and the associated enterprises and by applying FAR analysis, it was held that where the finished goods were customized goods and the geographical differences, volume differences, timing differences, risk differences and functional differences were there, then CUP method would not be the most appropriate method to determine arm's length price. The TNMM method was held to be most appropriate method. Further, the Hon ble High Court has applied similar reasoning while deciding appeal of assessee relating to assessment year 2005-06 in ITA No.1388/2015, vide judgment dated 18.04.2018 and the appeal of Revenue has been dismissed. In the totality of the above said facts and circumstances, where the issue stands covered by the order of jurisdictional High Court in the case of assessee itself, there is no merit in the orders of authorities below in making aforesaid transfer pricing adjustment in the hands of assessee both with respect to exports to associated enterprises and with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintainable for assessment year 2011-12 before the Tribunal. However, the issue has been considered elaborately by the CIT(A) and the claim was allowed in the hands of assessee. 14. We find that the said issue of claim of additional depreciation on tools has been decided by the authorities below in assessment year 2012-13 relying on earlier order of Assessing Officer in assessment year 2011-12. However, the CIT(A) has considered the scheme of the Act and has pointed out that as far as Finance Act, 2002 was concerned, then the scope of additional depreciation was where capacity of the unit has been increased by minimum 25% and if the assessee fulfills such requirement, then additional depreciation was to be allowed. However, the said conditions have been withdrawn by the Finance Act, 2005 and the relevant Explanatory Note has been referred by the CIT(A) while deciding the appeal in assessment year 2011-12. The aim under the Finance Act, 2005 while allowing the additional depreciation under section 32(1)(iia) of the Act was extended to new industrial undertaking on additional investments. Once the earlier basis of allowing additional depreciation for the units where ..... X X X X Extracts X X X X X X X X Extracts X X X X
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