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TMI Blog2022 (11) TMI 198X X X X Extracts X X X X X X X X Extracts X X X X ..... has erred in deleting the arm's length price adjustment of Rs. 4,75,00,000/- made by the AO/TPO on account of purchase of greasy wool from its AE by the assessee from its associated enterprise by the assessee. 2. That on the facts and circumstances of the cases and in law, the Ld. CIT(A) has erred in considering internal CUP as the most appropriate method ignoring the fact that CUP method is used in exact product similarly with AEs and non-AEs but in case of assessee, the product varieties/specifications are different and not comparable under CUP. 3. That on the facts and circumstances of the cases and in law, the Ld. CIT(A) has erred in not appreciating the fact that where prices varies on account of various issues i.e. timing of transaction, volume of order and geographical location, then CUP method cannot be applied and it is most appropriate to apply TNMM method. 4. That on the facts and circumstances of the cases and in law, the Ld. CIT(A) has failed to bring on record any cogent reason and rational for accepting CUP method as the most appropriate method in assessee's case and why TNMM which considered functionality at a broader level is not applicable for bench mark ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Rs. 4,75,00,000/- to the international transactions to arrive at the ALP vide order dated 24.10.2018. Accordingly the AO framed the assessment by adding this amount. 6. In the appellate proceedings, the Ld. CIT(A) allowed the appeal of the assessee by observing and holding as under: "10. FINDINGS & DECISION: [ Ground Nos. 4 to 7] 1. I have carefully considered the submissions of the Id. AR of the appellant in the backdrop of the observations and; the findings of the Ld. TPO recommending the adjustment of Rs.4,75,00,000/-. The appellant company is principally engaged in the business of processing raw wool, greasy wool, polyester into wool tops,woolen fabrics etc. On examination of Form 3CEB and the modus operandi of the business, I find that the appellant would import greasy wool from its AE, M/s EAC and other unrelated parties which would be processed at its manufacturing facility in India and the final product i.e. the woolen yarn and fabrics would be sold to its AEs, M/s GTM and M/s EAC and also unrelated independent parties. Both the international transactions involving import of raw materials from AEs as well as export of woolen yarn and fabrics to AEs were reported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sailed the findings given by the Ld. TPO for rejecting the TPSR in respect of the purchases made from AEs. The Ld. AR of the appellant has pointed out the factual infirmities & errors in the averments made by the Ld. TPO to reject the TPSR and substantiated that the internal CUP was the most appropriate method. The Ld. AR referring to the comparative statements & details of invoices involving purchases by the appellant from AEs and non-AEs claimed that the transaction was at arm's length. The Ld. AR further argued that this manner and method of benchmarking under internal CUP Method was followed by the appellant in the preceding years as well and in all the transfer pricing assessments framed u/s 92CA(3) for AYs 2002-03 to 2004-05, the Id. TPO had accepted CUP Method to be most appropriate method and the comparability analysis using the weighted average price method. It was further explained that even the application of external TNMM by the Ld. TPO suffered from serious defects & infirmities. It was explained that even if TNMM Method is considered To be most appropriate method and is applied in the right perspective; then also the transactions of the eligible unit would be foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application of internal CUP applied on same lines and methodology and the factual matrix of the case has remained unchanged, there is no reason to depart from the view followed in all the past transfer pricing assessments. For the reasons set out in the foregoing, T am of the considered view that the reasons given by the Ld. TPO to reject the appellant's TPSR are wholly unsustainable. I am of the considered view that the internal CUP was the Most Appropriate Method and hold that the transactions involving purchase of greasy wool from AE, EAC was on arm's length. In that view of the matter the impugned adjustment of Rs.4,75,00,000/- is held to be unsustainable. 7. In view of the reasons discussed in the foregoing paragraphs, since I have already held that the international transactions were at arm's length under the internal CUP Method, it is no longer be necessary to examine the alternate contention of the appellant. In the impugned transfer pricing order the Ld. TPO has dealt with in great detail the application of TNMM for benchmarking the international transactions and even the Ld. AR of the appellant in his written submissions has made detailed submissions point ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices are available then the ALP shall be the arithmetic mean of such prices. The Ld. CIT(A) also relied on the decision of Hon'ble ITAT, Delhi in the case of JSW Ltd. Vs. ACIT reported in (100 taxmann.com 268) and the decision of Hon'ble ITAT, Mumbai in the case of ACIT vs. Esser Steel Ltd. (50 taxmann.com 183). We further note that the was having similar transactions with its AE and CUP bench marking analysis done by the assesse under identical facts has been accepted by the TPO in the orders framed u/s 92CA(3) of the Act by accepting the transactions with the AE to be at arms length price and no transfer pricing adjustment was made. Therefore on this score also we find considerable force in the assesse arguments that once the revenue has accepted accepted the method or proposition in the earlier years , then it is not open to the revenue to take a different in the subsequent years unless there is change in facts or in law. This is in consonance with the ratio raid down by the Hon'ble Apex court in the case of Radhaswami Satsang Vs CIT 193 ITR 321 (SC). Having perused the order of Ld. CIT(A) and the ratio laid down in the decisions as referred to above ,we are of the considered vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to working capital of the appellant company. Accordingly, the appellant had claimed Seduction only" in respect of Rs.24,06,174/-. The Ld. AO however was not agreeable to aforesaid manner of apportionment of exchange fluctuation loss and following the line of reasoning adopted by his predecessor in AYs 2001- 02, 2002-03 & 2003-04, he denied the claim of deduction,-of exchange fluctuation loss. 2. Upon giving due consideration to the submissions put forth by the appellant and the details furnished, it is noted that the appellant had utilized loan amount of Euro 60,00,000 to the extent of rupee equivalent of Rs. 18,79,63,018/- towards acquisition of fixed assets and sum of Rs.5,42,03,107/- towards working capital. In accordance with the Accounting Standards-11, the outstanding foreign exchange loan amount would be re-stated at the prevailing exchange rates and the exchange fluctuation loss was apportioned between the loan sum attributable to the fixed assets and working capital. I find that this manner of apportionment of exchange fluctuation loss was also followed in earlier AYs 2001-02, 2002- 03 & 2003-04. The Ld AO's predecessors had disallowed the deduction claimed in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal of the assessee. Considering these facts and various case laws as relied by the Ld. CIT(A), we do not find any infirmity in the order of Ld. CIT(A) and accordingly, the same is affirmed by dismissing the ground no. 5 of the revenue's appeal. 12. The issue raised in ground no. 6 is directed against the order of Ld. CIT(A) deleting the addition of Rs. 14,44,089/- as made by the AO from bogus non-existent party. 13. Facts in brief are that during the course of assessment proceedings, the AO issued notice u/s 133(6) of the Act to various parties with whom the assessee had business transactions. However in respect of two parties i.e. M/s Pran Brothers & Co. and Rajesh Kapoor with whom the assessee had transactions during the year to the tune of Rs. 14,44,089/-, the notices were returned unserved with remarks 'not found' or 'left'. Accordingly the assessee was called upon to explain the transactions. The assessee did not reply during the assessment proceedings and accordingly the said amount was added by the AO to the income of the assessee Rs. 11,24,751/- paid to M/s Pran Brothers & Co. on account of repair and maintenance and Rs. 3,19,338/- paid to Rajesh Kapoor on account of c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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