9911796707
TMI Blog2020 (12) TMI 813X X X X Extracts X X X X X X X X Extracts X X X X ..... the margin of the assessee. After sale support services, training to customers and local staff for troubleshooting and service coordination expenses are thus, required to be included for determining the gross profit margin in resale price method. In view of this, we do not find any infirmity in the order of the ld TPO and CIT(A). Accordingly Ground no. 3 to 5 of the appeal are dismissed. - ITA No. 3834/DEL/2017 - - - Dated:- 10-12-2020 - Kuldip Singh, Member (J) And Prashant Maharishi, Member (A) For the Appellant : Ajit Korde, Arun Bhadauria and Prashant Mehar Chandani, Advs. For the Respondents : Rakesh Kumar, Sr. DR ORDER Prashant Maharishi, Member (A) 1. This appeal is filed by the assessee against the order of The Commissioner of Income Tax (Appeals)-44, New Delhi [The ld CIT A] dated 27th of December 2016 for assessment year 2011-12 wherein the appeal filed by the assessee against the order of The Deputy Commissioner of Income Tax, Circle-25(2) New Delhi [The Ld AO] passed u/s. 143(3) read with Section 144C of the income tax act 1961 [The Act] dated 28th of April 2015, was partly allowed. 2. The assessee has raised the following grounds of appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O] for determination of the arm's-length price. The main international transaction entered into by the assessee is a purchase of traded goods amounting to ₹ 5,76,00,378/-. This is benchmarked by the assessee adopting the Resale Price Method. The assessee has stated that assessee purchased the machine tools from its associated enterprise and it has been sold for ₹ 6,31,28,791/-. However the learned assessing officer further noted that assessee has incurred substantial personal expenses of ₹ 2,60,83,480/- out of which salaries and wages are ₹ 2,50,57,843/-. It was noted by the learned transfer pricing officer that if the assessee is performing only trading functions, these expenses were not justified in relation to the total turnover of ₹ 8,98,57,542/-. Learned TPO further noted certain expenses and stated that assessee is undertaking other functions like advertising, sales promotion and having a distribution network and incurring of these other costs are also indicate that assessee is not acting as a mere trader but taking on significant other functions also. Therefore the learned TPO issued the show cause notice to the assessee that the choice of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s which is a significant amount of expenditure and show that the function of the assessee is not that of a mere treader but something more. Thus he selected the transactional net margin method as the most appropriate method. With respect to the comparability he accepted the filter suggested by the assessee that as assessee is a very small player in the industry in terms of sales turnover, turnover filter shall be allowed. Accordingly he considered seven comparable companies whose margin was computed at 4.16% and compared with the margin of the assessee of (-) 42.42 percentage. Accordingly the arm's-length price of the international transaction on the operating revenue was determined at ₹ 6,05,02,633/- against price charged by the assessee of ₹ 8,99,05,977/- and thereafter the adjustment was proposed at ₹ 2,94,03,344/- as per order u/s. 92CA on 28th of January 2015. Based on this the learned assessing officer passed the draft assessment order on 25th of February 2015 determining total income of the assessee at ₹ 64,71,044/- against the return of income filed at the loss of ₹ 2,29,32,000/-. Consequently the final order was also passed u/s. 143(3) rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted because the expatriate expenses of ₹ 2,60,83,480 was considered as the direct expenses and consequent gross loss was determined at ₹ 1,74,83,711 and consequently the margin of the assessee of gross loss was 27.70% against the profit margin of the comparable company at 12.25%. 6. As per ground number 3-5 the assessee is aggrieved with the computation of the profit level indicator as directed by the learned CIT-A. The learned authorised representative submitted before us the job profile of three expatriates employees and stated that cost of these employees cannot be reduced while computing the profit level indicator when resale price method is to be applied. It was stated that Mr. Hideo Matsuko has the job requirement of after sale support to the machine users in India and also providing training to customers and local staff over troubleshooting, application and maintenance of special-purpose cylindrical and crankshaft machines. It is also for coordination with Japan for warranty parts, technical support and arrangement for drawings as and when required. The rational for recruiting such as person was that the machines that were supplied, skills for these machines w ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
