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TMI Blog2018 (1) TMI 1723X X X X Extracts X X X X X X X X Extracts X X X X ..... more than 62%. Even in three consignments having FE content less than 62% in one case iron ore content is 50. 60%. There is no need to quote any authority to hold that market value of the ore having 50. 60% FE would be less than the ore having 62% FE. Besides, price of iron ore, like any other exported commodity, is highly sensitive and has wide fluctuation depending upon demand and supply. Considering these peculiar facts, we are of the opinion that the DRP had rightly held that TIPS data was not a reliable tool to determine the ALP of the IT's of the assessee. TP provisions try to bring parity between the controlled and uncontrolled IT. s of similar nature. For that matter some methods have been incorporated in the IT Rules, 1962. The method is procedural part of the TP exercise, but the substantive law is Chapter X of the Act. What has to be seen in such proceedings that IT. s are valued in a reason ably fair manner. TP provisions are not based on some arithmetic or scientific formulas that would always give similar results in similar conditions. They find place in statute to take care of various and different situations and circumstance of dynamic business world. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 3. 89 crores. 3. Effective ground of appeal is about adopting the most appropriate method to benchmark the IT. s. During the Transfer Pricing (TP) proceedings, the TPO found that the assessee had adopted TNMM for determining the ALP of the IT. s, that 14 comparables were identified for that purpose, that the arithmetic mean margin of comparables was computed at 1. 56%, that the operating margin on cost was claimed at 3. 47%, that the IT. s were claimed to be at arm s length, that it had entered into seven transactions of sale of iron ore, that out of the seven, four transactions were with the AE. s, that three transactions were with non-AE. s, that all the transactions were undertaken on FOB basis, that a few transactions with AE. s were below the rate entered into with the non-AE. s. He directed the assessee to explain the reasons for the disparity in pricing of iron ore sold to the AE. s and the non-AE. s. He also directed the assessee to update the operating margins of the comparable companies. 3.1. After considering the submissions of the assessee, the TPO observed that iron ore was commonly exported from all the ports of India. He directed the assessee to benchmark ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of realistic, that while using it, reasonable and accurate adjustments should be allowed, that quality of iron ore had a substantial bearing on its price, that in the absence of details regarding actual iron content it would be unfair to compare such prices with the price at which the iron ore had been exported by the assessee to its AE, that the assessee had pointed out various instances in the TIPS data wherein unit prices of a specific category of iron ore varied widely, that among the assessees own transactions export prices for different categories varied widely, that the assessee had only exported iron ore fines, that for the purpose of comparability analysis the TPO had considered iron ore fines and iron ore lumps, that the price of iron ore lumps was higher than price of iron or iron ore fines, that that the assessee had exported iron ore to its AE s on FOB basis, that the price for export by third parties was not mentioned in the data provided by the TPO, that the variation in price and terms would have a significant impact on the price, that the price of iron ore would fluctuate by quantum of sales also, that the price for bulk purchase/sales were usually negotiated/ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shanxi Dajin International (Group) Co. Ltd. Non AE 49000 3,283. 11 2,001 64.07% 3. GNR Maco Commercial Offshre Co. Ltd. AE 36000 3,125. 22 2,500 25.01% 4. Zenith Macao Commercial Offshore Co. Ltd. Non AE 36100 2,807. 74 2,400 16.99% 5. Shanxi Dajin International (Group) Co. Ltd. Non AE 72123 3,420. 92 3,021 13.24% 6. General Nice Resource (Hong Kong) Ltd. HK AE 62550 4,971. 67 4,160 19.51% 7. General Nice Resource (Hong Kong) Ltd. HK AE 75538 1,877. 82 1,450 29.50% The DRP further observed that GP in Non-AE-transaction varied from 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o categories- i. e. having iron content 62% and having iron content 62% or less. The assessee had exported iron ores to its AE. s having FE contents of 63. 01%, 63. 38%, 60. 16% and 50. 60%. Export details clearly show that in three consignments FE content was less than 62% and only in on consignment FE was more than 62%. Even in three consignments having FE content less than 62% in one case iron ore content is 50. 60%. There is no need to quote any authority to hold that market value of the ore having 50. 60% FE would be less than the ore having 62% FE. Besides, price of iron ore, like any other exported commodity, is highly sensitive and has wide fluctuation depending upon demand and supply. Considering these peculiar facts, we are of the opinion that the DRP had rightly held that TIPS data was not a reliable tool to determine the ALP of the IT. s of the assessee. 6.2. If we analyse the directions of the DRP it depth, it becomes clear that though it had used term RPM to decide the fair market value of the transactions, but actually it had approved the method adopted by the TPO to a certain extent. Using the term RPM at one place in itself is not such a grave mistake which woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t proposed by the TPO/AO-it resulted in lower adjustment. The AO had used the TIPS data but it had so many lacunas. The DRP, therefore, after obtaining details of all the seven AE and non-AE transactions, directed the AO to follow a particular method. Thus, there is no basic difference in the approach of the TPO and DRP. Certain modifactions, were made by it and we hold that same were required to decide the ALP. 6.4. We would also like to mention that the cases relied upon by the DR are not relevant to decide the issue before us. In the case of Tilda Riceland Private Ltd. (supra)it was held that TIPS data can also be used for TP purposes. There is no doubt about it but the issue is how it should be utilised. The DRP had specifically pointed out as to how the TIPS data in the case under consideration was not applicable. It pointed out the deficiencies of the data and the factors that vitiated the comparability. Thus, facts of both the cases are totally different. In the case of Living stones (supra), the Tribunal has dealt with the method to be adopted for the AE and non- AE international transactions. Considering the peculiar facts of diamond industries it had dealt with the iss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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