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TMI Blog2018 (4) TMI 1837X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 2004-05, 2005-06 and 2006-07 and has deleted the addition recommended by the TPO. The same ground has also been upheld by my order for AY 2007-08 - price charged by the Appellant's branch in India is at arm's length price. No reason to deviate from my earlier order and hence, the TP adjustments made by the AO with regard to the derivative products are deleted. The AO is directed to delete the addition made in this regard. - Decided in favour of assessee. Transaction relating to money deposits by placing reliance on I.T. Rules 10A(d) - while applying CUP method of ALP determination each such transaction could be evaluated/ benchmarked separately - HELD THAT:- As decided in Audco India [ 2010 (11) TMI 769 - ITAT MUMBAI ] keeping in view that the difference between the sale of L T LLC and Arm's Length Price is only 3.35% which is well within the limit of 5%, we are inclined to uphold the finding of the ld. CIT(A) in deleting the addition made by the Assessing Officer. The ground taken by the revenue is, therefore, rejected - SRI MAHAVIR SINGH, JM AND SRI MANOJ KUMAR AGGARWAL, AM For The Assessee : Madhur Agarwal, AR For The Revenue : V. Janardhanan, DR OR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee stated that this issue is squarely covered by Tribunal s decision in assessee s own case for AY 2006-07 and 2007-08 in ITA No. 178/Mum/2018 and 4030/Mum/2014 respectively, wherein Tribunal vide Para 4.4. has decided the issue deleting the addition and the same reads as under:- 4.4. We have heard the rival submissions and perused the material before us. We find that the assessee was playing a very limited role in the sequence of activities of sanctioning of loan by the AE s to the Indian customers. The contribution on part of the assessee was limited to establishing initial contact with Indian entities and acting as a liaison between the AE and the customer. It is a fact that loan was granted by the AE.s and all the gains and risks of the transaction was with them only. The assessee was compensated by the AE.s for the job done by it. As far as interest income is concerned, it is clear that there was no contract /agreement between the assessee and the AE.s to share the interest amount. The assesse is objecting to the adjustment made under the head interest income. It has no objection with regard to the other portion of the adjustment. So, we direct the TPO/AO that only 20% of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee s appeal for AY 2009-10 in ITA No. 2242/Mum/2015 and hence taking a consistent view, we allow the appeal of the assessee partly and direct the AO to follow the Tribunal s order for AYrs 2006-07 and 2007-08. This issue of assessee s appeal is partly allowed. 7. The first issue in Revenue s appeal in ITA No. 2305/Mum/2015 for AY 2008-09 is as regards to the order of CIT(A) in deleting the addition made by TPO on account of receipt of sales credited relating to derivatives on cost plus margins of 72.94% earned by assessee, which was more than 25% earned by comparable price. For this Revenue has raised the following ground No. 1.1 and 1.2 as under:- 1.1 On the facts and in the circumstances of the case and in law, the ld.. CIT(A) erred in deleting the addition of ₹ 1,628,474,794/- made by the assessing officer/Transfer pricing Officer on account of receipt of sales credit relating to derivatives deals by observing that the cost plus margin of 72.94 % earned by the assessee was far more than 25% earned by comparable companies. The ld.. CIT(A) erred in not appreciating that TNM method was not the most appropriate method in this case because the profit from marketing of deriv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d transactions,relied upon by him,were not available in the public domain. The assessee did not have any opportunity to examine the comparability of FAR of the transactions selected by the TPO. In our opinion,use of untested comparables to determine the ALP is against the basic spirit of the TP provisions and the Rule 10 of the Rules The TPO had also violated the principles of natural Justice by not confronting the assessee with the comparables used against it. He proposed an addition of ₹ 51.12 crores to the income of the assessee without affording an opportunity to it,so that it could become aware of the basis for the adjustment.Only on this count the adjustment could be validly deleted. 5.4.But,we would like decide the issue on merits also.It is found that the assessee had followed GTPP for TP purposes,that as per the global policy the Indian branches-rendering the services and arranging for the sales of the derivative products for its customers from its foreign brancheswere to get at 24.40 percent of the INPV.The Appellant had carried out a TP study and had applied TNMM for determining the ALP.We find that the average cost plus margin of the uncontrolled comparables was 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... controlled transaction, by no sheer logic a comparable controlled transaction can be employed for the purposes of making comparison. There is no warrant for diluting the prescription given by the statute or rules when such prescription itself serves the ends of justice properly and is infallible. If the view of the Revenue that a controlled transaction should not be shunted out for the purposes of benchmarking is accepted, then all the relevant provisions contained in Chapter X in this regard, will become otiose. If such a contention oj making comparison with a comparable controlled transaction is taken to its logical conclusion, then there will never arise any need to take up any case for transfer pricing scrutiny. The reason is obvious. ALP is determined for application in respect of transactions between two AEs so that the profit likely to arise from such transactions is not under-reported vis-a-vis from similar transactions with third parties. If the comparison is made again with net profit margin realized from transactions between two AEs, instead of third parties, it may demonstrate the same cooked results in both the situations, thereby leaving no scope for any adjustment. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, as the TPO infringed the relevant provision of the Income tax act and Rules. In the case of Havells India Ltd.(140 TTJ 283)the Tribunal has dealt with the issue of restoring the matter to the file of the TPO and has held as under: 29.Apropos the ld.DR s contention asking for remitting the matter to the Assessing Officer, it must be noted here that such a course is neither required, nor appropriate to be adopted. As an appellate authority, the Tribunal has to see whether the assessment framed has been framed in accordance with law and if there is sufficient material to support it. If that is so, it is not for the Tribunal to start investigation suo moto and to thereby fill up the lacunae if there is material to support the assessment, the assessment, as confirmed or upheld by the CIT(A) needs to be sustained by the Tribunal If not, the assessment falls. It is for the department to gather material and make proper assessment and the Tribunal is not in that manner, an income-tax authority. The income-tax Act does not envisage the ITAT as an income-tax authority, rather in the scheme of the Act, it is a purely appellate authority. That being so, as observed in Raj Kumar Jain v. Asst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by my order for AY 2007-08. In view of this, I hold that the price charged by the Appellant's branch in India is at arm's length price. I have no reason to deviate from my earlier order and hence, the TP adjustments made by the AO with regard to the derivative products are deleted. The AO is directed to delete the addition made in this regard. 10. As the facts are exactly identical and lower authorities have relied on earlier years orders, which are decided in favour of assessee and against Revenue. Respectfully following the Tribunal s order, we confirmed the order of CIT(A) deleting the addition. 11. Similar is the first issue in Revenue s appeal for AY 2009-10 in ITA No. 2306/Mum/2015 whereby the first issue is regarding the TP adjustment to the profit from marketing of derivatives. Since, we have decided the issue in AY 2008-09 in ITA No. 2305/Mum/2015 confirming the order of CIT(A) deleting the addition, taking a consistent view we confirm the order of CIT(A) in this year also. This issue of Revenue s appeal is dismissed. 12. The one more issue in Revenue s appeal in ITA No. 2306/Mum/2015 for AY 2009-10 is as regards to the order of CIT(A) directing the AO / TPO to agg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed reliance on the ruling of the Mumbai Bench of the Income-Tax Appellate Tribunal (Mumbai ITAT) in the case of Essar Steel Ltd. (ITA No 3727/Mum/2011), wherein the Mumbai ITAT has drawn reference to Rule 10(A)(a) of the Income tax Rules, 1962, which defines a transaction to include a number of closely linked transactions. In such a case, the Mumbai ITAT held that if the transactions are closely linked, then they can be aggregated for determining the ALP. In the aforementioned case, it was held that if the product remains the same and the source from which the average price has been taken remains the same, it is a fit case for aggregation. A similar view was also taken by the Mumbai ITAT has upheld the aggregation of transactions as against arbitrary selection of individual items. Separately, in the case of Boskalis International Dredging International CV (ITA 4862/Mum/2008), the Mumbai. The Mumbai ITAT noted that aggregation and clubbing of the closely linked transactions are permitted under the Income-tax Rules, 1962 and it is also supported by OECD transfer pricing guidelines. 7.4 A summary of the interest paid and received on all money market deposit transactions is provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the learned Counsel for the assessee stated that the issue is covered by the co-ordinate Bench of this Tribunal in the case of ACIT vs. Audco India Ltd. (2011) 47 SOT 420 (Mum), wherein it is held as under:- 10. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that the facts are not in dispute. We further find that the ld. CIT(A) has observed in paras 4.4 and 4.8 of his order as under: 4.4 I have perused the facts of the case, Transfer Pricing Officer's (TPO) order and assessment order thereof on this point. It is observed that the appellant had supplied the gate, globe and check valves to its AE amounting to ₹ 2,13,64,571. The primary business of the AE is sourcing of valves from the appellant company and marketing them in American markets. The appellant had the confidence to adopt CUP methodology which is the traditional method to justify its Arm's Length. It filed full details, in this regard, before the TPO as well as the undersigned. While passing the order, the TPO ignored this data by dismissing it as general in nature. 4.8 The aggregate sale to an AE at USA is only ₹ 2,13,64,571, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e data where the 5% limit is lower in respect of AE and ignoring those figures/data where sale of valves to the AE are at prices higher as compared to the average prices charged to third unrelated parties. The addition so made on totality of facts is, therefore, deleted. In the absence of any contrary material placed on record by the revenue against the finding of the ld. CIT(A) and keeping in view that the difference between the sale of L T LLC and Arm's Length Price is only 3.35% which is well within the limit of 5%, we are inclined to uphold the finding of the ld. CIT(A) in deleting the addition made by the Assessing Officer. The ground taken by the revenue is, therefore, rejected. 15. Similarly, in the case of ACIT vs. Essar Steel Ltd. (2014) 50 taxmann.com 183 (Mumbai-Trib.), wherein it is held as under: - 10. We have considered rival contentions and gone through the orders of the authorities below. A clear finding has been recorded by the CIT(A) to the effect that assessee has already considered all the 8 transactions with its AE in totality by aggregating the same whereas the TPO picked up two transactions where the price charge was less than the average market price. Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X
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