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TMI Blog2023 (11) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... riod. OECD guidelines of July, 2010, wherein it is mentioned that making working capital adjustments involves the selection of the appropriate interest rate (or rates) to use. The rate (or rates) should generally be determined by reference to the rate(s) of interest applicable to a commercial enterprise operating in the same market as the tested party. We uphold the order of CIT(A) and this issue of Revenue s appeal is dismissed. Reduction of economic adjustment on foreign exchange fluctuation loss, non-cenvatable custom duty adjustment - HELD THAT:- The assessee has tried to show the details of higher custom duty incurred but no comparable was cited but ld.counsel for the assessee stated that his mater can go back to the file of AO for verification whether the assessee is paying higher custom duty i.e., non-cenvatable custom duty and the comparables are either procuring indigenous raw material or buying lesser custom duty which could be set-off against cenvat. We noted that the authorities below have not adjudicated this issue by comparing the custom duty paid by the assessee and its comparable. Hence, this issue needs verification at the level of TPO/AO. Needless to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch as Rail-sub Assembly, Fork-Shift, Rail shift, Complete Shaft Assemble, Brkt Assemble-Eng Supt, Gear Differential and Shaft Input. The company caters to OEM Hyundai Motors India and its ancillary units. The AO considering the issues involved, the matter was referred to Transfer Pricing Officer for determination of arms length price with reference to international transaction entered into by the assessee and as reported in Form No.3CEB for the relevant assessment year 2014-15 u/s. 92CA(1) of the Act. The TPO noted in the show cause notice that the basis of working capital adjustment to increase assessee s margin is not stated in its TP study and working capital adjustment claimed in TP audit cycle was not found to be justified and therefore it was rejected. The TPO noted that in any case other than non-AE payables the credit period is 60 days and any interest on overdue payable should be with reference to the invoice in the case of tested party for the impeded interest to be proportionate to the credit period as per invoice only and he proposed the possible rate of interest would be as per LIBOR rate only because which is much lower than the rate of interest as per bank interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lines of July, 2010, wherein it is mentioned as under:- A major issue in making working capital adjustments involves the selection of the appropriate interest rate (or rates) to use. The rate (or rates) should generally be determined by reference to the rate(s) of interest applicable to a commercial enterprise operating in the same market as the tested party. The ld.counsel stated that the CIT(A) has rightly allowed the claim. We uphold the order of CIT(A) and this issue of Revenue s appeal is dismissed. Assessee s Appeal in IT(TP)A No.27/CHNY/2019 5. The first issue in this appeal of assessee is as regards to reduction of economic adjustment on foreign exchange fluctuation loss, non-cenvatable custom duty adjustment, power relatable adjustment, risk adjustment and abnormal freight charges adjustment. 6. The assessee while computing ALP claimed working capital adjustment in relation to power related adjustment or freight adjustment and adjustment on account of foreign exchange fluctuation. The TPO rejected the air freight adjustment by observing as under:- 7.5 The rationale for rejecting Power cost adjustment applies with equal force to this claim also. With u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow cause notice and not as part of the Transfer Pricing Study. The plethora of decisions relied upon by the assessee have been considered. Each business has its own unique features. In this case, if the pattern of imports of raw materials and components from AE is relied upon for the various years during which the assessee has been in existence, and unequivocal inference one would draw is that the assessee has an unique business model dictated by the parents of both the transacting parties, which in this case is the taxpayer, M/s. Hyundai Motors India Ltd. The Customs duty adjustment cannot be allowed as a matter of routine where the assessee has no other option but to rely upon its supplies from associated enterprises for reasons not specifically brought out on record. Therefore, the adjustment claimed is rejected. Aggrieved, assessee preferred appeal before CIT(A). The CIT(A) also rejected the claim of custom duty adjustment by observing in para 14 as under:- 14. The submissions of the assessee company are verified. The customs duty paid / payable is a part of import cost of the assessee concern. The custom duty accepted by the assessee is a factor of the cost of local ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee is paying higher custom duty i.e., non-cenvatable custom duty and the comparables are either procuring indigenous raw material or buying lesser custom duty which could be set-off against cenvat. We noted that the authorities below have not adjudicated this issue by comparing the custom duty paid by the assessee and its comparable. Hence, this issue needs verification at the level of TPO/AO. Needless to say, the assessee will file all the details before the AO/TPO and accordingly, the matter is restored back to the file of the AO/TPO, who will examine the facts in detail and then decide this issue. Principally, the assessee is entitled to claim of non-cenvatable custom duty adjustment and it has to be decided based on facts. Accordingly, this issue is remitted back to the file of the AO. 8. As regards to foreign exchange fluctuation loss adjustment not provided by AO/TPO or CIT(A), the ld.counsel for the assessee stated that it imports all the main components from the overseas suppliers including its AE s whereas comparable companies have largely indigenized purchase of raw material and on an average, the raw material imported by comparable companies is very minuscul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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