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TMI Blog2017 (4) TMI 1535X X X X Extracts X X X X X X X X Extracts X X X X ..... nture company of AE which expects more concessions than unrelated companies. In the instant case, the assessee has not demonstrated that it did not get volume discount with relevant bills of the comparable companies. The ALP is determined to arrive at the reasonable and fair price to the assessee from AE to plug diversion of profits. Since the assesse failed to prove that the Non AE company was allowed volume discount with relevant bill or account copy, we are unable to accept the adjustments sought by the assessee on account of volume discount andaccordingly dismissed the appeal of the assessee on this issue. Addition on account of difference in SPCEN and SPCD Trading Grades - assessee argued that both the SPCEN and SPCD Trading Grades are different degrees in comparability, characteristics for applying the CUP method - HELD THAT:- As we observe that the assessee has raised this ground before the Ld. CIT(A) but the Ld. CIT(A) has not adjudicated this ground. Therefore, we remit the matter back to the file of the Ld. CIT(A) to decide this ground on merits. The assessee s appeal on this ground is allowed for statistical purposes. Selection of Most Appropriate Method - a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Price ( CUP ) method without applying the principles of application of CUP method as provided in Rule 10B(1)(a) and Rule 10B(2) of the Income Tax Rules, 1962 ( the Rules ). 3. The Learned CIT(A) and the TPO erred in law and on facts in failing to appreciate the material differences between the uncontrolled transactions and the international transactions. Specifically, the CIT(A) and the TPO grossly erred in disregarding the 5%volume discount granted by the Associated Enterprise for sale to a third party, and by/failing to make suitable adjustments to eliminate the material effect of such volume difference thereby disregarding Rule 10B(3) of the Rules. 4. The Learned CIT(A) and the TPO erred in law and on facts in failing to aggregate the same class of international transactions undertaken by the Appellant during the year for the purpose of determination of ALP, thereby disregarding the provisions of Section 92C of the Income Tax Act, 1961 ( the Act ), read with Rule 10B(1)(a) and Rule 10B(2) of the Rules. Specifically, the Learned CIT(A) and the TPO erred in taking into account only those transactions where the purchase price from Associated Enterprise was higher than the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed necessary either at or before the hearing of this appeal as per law. 3.0 Background of the Company Brief facts, International transaction and the method adopted by the assessee are extracted for the sake of convenience from the order of the TPO which reads asunder: M/s. POS-Hyundai is a Joint Venture Company Promoted by three Korean Multi Nationals Hyundai Corporation (HC), Pohang Iron Steel Company (POSCO) and POSCO Steel Service sand Sales Company (POSTEEL) to manufacture Steel Sheets and components out of cold rolled steel Coils for supply predominantly to Hyundai Motor India Limited (HMIL)and other Automobile White Goods Industries. POS-Hyundai was incorporated in 1997 with the main objects to carry on business of steel sheet fabrication and manufacture of steel components and parts in primary semi-finished and finished form for automobile, capital goods and other industries. Subsequently, the main object was inserted with the following: To carry on the business of import, trading warehousing/storage facility through wholesale cash and carry route of items directly related to manufacturing process namely CR coils, HR coils and GI coils, etc . Vide a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the above period. Step-3: On the above price of unrelated importer adjustment is made as appropriate towards volume discount. In the instant case, the import volume of particular grade of unrelated imported is 12 times more than our own imports for the same spec/grade. On are asonable basis, a 5% discount adjustment is considered in their average import price. Step-4: Adjusted import price of unrelated importer is arrived. Step-5: The import price determined above, using the uncontrolled transaction of unrelated importer is more than the actual import price from the same supplier/related Company the actual import price is the Arm s Length Price. The import price determined above, using the uncontrolled transaction of unrelated importer is less than the actual import price from the same supplier/related Company, the unrelated import price is the Arm s Length Price. Step-6: If the Arm s Length Price is less than the actual import price of particular spec/grade, there will be an addition to the total income taken for tax purpose. The addition is determined taking the difference of above two prices multiplied by the total actual import quantity of the particular spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om Hyundai Corporation Ltd., stating that volume discounts are allowed to Mahindra Inter trade Ltd during the period under consideration @5% on its sales. The TPO rejected adjustment sought by the assessee on the reasoning that the prices of the non-AE Company was less even after volume discount and no further adjustment is required to be made. The Ld. CIT(A) has dismissed the assessee s appeal for allowing the volume discount placing reliance on the Assessment Order. Hence the assessee is in appeal before us. 7.0 Appearing for the assessee, the Ld.AR argued that the AE has granted 5% volume discount for sale of third party sales which was not granted to the assessee. Therefore, the Ld.AR requested an adjustment of 5% volume discount on its purchases. The assessee has taken us to Paper Book Page No.241 wherein M/s. Hyundai Corporation has given a letter to the Ld. CIT(A) stating that 5% overseas volume discount is allowed on C F price who purchases in excess of 10000 MT and accordingly, it was stated that M/s. Mahendra Inter trade Ltd., was allowed trade discount @5% since it has purchased 12889 MT. Hence, the assessee sought for adjustment towards the volume discount of 5%. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, the assessee has not demonstrated that it did not get volume discount with relevant bills of the comparable companies. The ALP is determined to arrive at the reasonable and fair price to the assessee from AE to plug diversion of profits. Since theassesse failed to prove that the Non AE company was allowed volume discount with relevant bill or account copy, we are unable to accept the adjustments sought by the assessee on account of volume discount andaccordingly dismissed the appeal of the assessee on this issue. 9.0 Ground No.5 is related to the addition on account of difference inSPCEN and SPCD Trading Grades. The assessee argued that both the SPCEN and SPCD Trading Gradesare different degrees in comparability, characteristics for applying the CUP method. However, no evidence is placed before us to establish the argument. The Ld.AR argued that this ground was raised before the CIT(A) but the Ld. CIT(A) has not adjudicated the ground and hence requested to remit the matter back to the file of CIT(A) for adjudication. The Ld. DR did not make any objection for remitting the matter back to the file of the CIT(A). 9.1 We have heard both the parties and observe that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omplete. For the aforesaid reasons, the assessee has chose the internal comparables of comparable uncontrolled price method. In such a scenario, having taken a stand to adopt CUP method and now during the appellate proceedings, resorting to TNMM method by the assesee, is only an af rethought and cannot be accepted. Hence, in the presence of reliable internal comparable data, CUP method was adopted by the TPO and difference in prices calculated. In the TP analysis, only in the absence of internal comparables, the external comparable swill be taken for the comparability purpose using the TNMM method. But in assessees case, the internal comparable are very much available and also the various factors, that would be analysed in the CUP method, ware also satisfied. The items purchased between AE and3d party were also very well comparable in the assessee s case. Hence, CUP is the suitable method. While analysing the assessee s additional comparability analysis submitted during theappellate proceedings as additional grounds of appeal, the majority of the comparables are functionally different and they are into multiple activities. Also assessee has taken weighted average da ..... X X X X Extracts X X X X X X X X Extracts X X X X
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