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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 ..... hat averaging of cost of purchases was not permissible under CUP method is in contradiction to the provision contained in Section 92C(2) read with Rule 10B(1)(a) of the Income Tax Rules, 1962 wherein it has been explicitly provided that where more than one uncontrolled transactions or prices are available then the ALP shall be the arithmetic mean of such prices. CIT(A) also relied on the decision in the case of JSW Ltd. [ 2018 (11) TMI 1250 - ITAT DELHI] and the decision of Esser Steel Ltd.[ 2014 (11) TMI 254 - ITAT MUMBAI] . We further note that the was having similar transactions with its AE and CUP bench marking analysis done by the assessee 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 - 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 in the case of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to as Ld. CIT(A) ] dated 29.11.2019 for the assessment year 2005-06. 2. Though the Registry has pointed out that the appeal is barred by limitation, however, in view of the decision of the Hon ble Supreme Court in Miscellaneous Application No. 665 of 2021 in SMW(C ) No. 3 of 2020, the period of filing appeal during the COVID-19 pandemic is to be excluded for the purpose of counting the limitation period. In view of this, the appeal is treated as filed within the limitation period. 3. The grounds of appeal raised by the revenue are reproduced as under: 1. That on the facts and circumstances of the cases and in law the Ld. CIT(A) 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 unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that it followed comparable uncontrolled price method for determination of ALP in respect of purchase greasy wool from AE which according to TPO was not appropriate method for the reasons that purchase of greasy wool from AE and external third party were not fully comparable and the period in which the greasy wool was purchased from AE was significantly different from purchases from external third parties. The assessee filed written submissions before the TPO however according to TPO the contentions of the assessee are not tenable and he after rejecting the same applied TNMM method after considering a set of 12 comparables thereby proposing adjustment 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.4,7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the appellant had adopted yearly average price, the timing difference got eliminated. The Ld. TPO although accepted the explanations furnished by the appellant in respect of its sale of woolen yarn fabrics to AEs but singled out the purchases of greasy wool from its AE. The Ld. TPO thereafter summarily rejected the TPSR of the appellant and proceeded to benchmark the transactions by applying external TNMM Method. The Ld. TPO identified 12 comparables and ascertained the PLI, viz. OP/OR, at 3.38% which; according to him fell outside the tolerance range of +/-5%. The Ld Rs.4,75,00,000/-. 3. In the present appellate proceedings, the appellant has strenuously assailed 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 argu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ression provisions contained in Section 92C(2) of the Act read with Rule 10B(L)(a) of the IT Rules, 1962 wherein it has been explicitly provided that where more than one uncontrolled transactions or prices are available then the ALP shall be the arithmetic mean of such prices. This proposition also finds support from the decision rendered by the Hon'ble ITAT, Delhi in the case of JSW Ltd Vs ACIT (100 taxmann.com 268) and Hon'ble ITAT, Mumbai in the case of ACIT Vs Essar Steel Ltd (50 taxmann.com 183). 6. I also find sufficient force in the Id. AR's argument that when the Ld. TPOs in all the past transfer pricing assessments completed u/s 92CA(3) had accepted the 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 involv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and weighted average purchase price from AE was Rs.280.66 in comparison to weighted average purchase price of Rs. 273.12 from non AE and the purchases from AE fell within the tolerance range of +/- 5%.We note that the Ld. CIT(A) has given a finding that the proceeded on wrong presumption and assumption of facts and erroneously rejected the TPSR. The Ld. CIT(A) also held that observations of the TPO s that averaging of cost of purchases was not permissible under CUP method is in contradiction to the provision contained in Section 92C(2) read with Rule 10B(1)(a) of the Income Tax Rules, 1962 wherein it has been explicitly provided that where more than one uncontrolled transactions or prices 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xtent of Rs.24,06,174/-. According to; the appellant it had obtained loan of Euro 60,00,000 from IFU in FY 2000-0i which was partly utilized for acquisition of fixed assets and partly to fund its working capital requirements. Having regard to the utilization of funds, the appellant had apportioned the aggregate exchange fluctuation loss between the funds used for acquisition of fixed assets and funds used towards working capital. For the relevant year, out of the total exchange fluctuation loss of Rs.1,71,86,956/-, the sum attributable to the block of assets worked out to Rs. 1,47,80,782/--which was capitalized to the cost of assets and the remaining sum of Rs.24,06,174/- was found to be relatable 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 deta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pugned disallowance in full. Ground Nos. 3 therefore stands allowed. 11. After perusing the facts on record and hearing the rival contentions, we find that loss claimed by the assessee of Rs. 24,06,174/- pertains to loss incurred upon restatement of loan in foreign currency at the year end which was attributable towards working capital. We note that the orders relied by the AO in respect of AYs 2001-02 to 2003-04 passed by his predecessor were reversed by the Ld. CIT(A) and loss pertaining to working capital was allowed. The Ld. CIT(A) has relied on the decision of Hon ble Supreme Court in the case of Woodward Governor Pvt. Ltd. (312 ITR 254) and ONGC vs. CIT (322 ITR 180) while allowing the appeal 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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