IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: `I' NEW DELHI
BEFORE SHRI R. S. SYAL, ACCOUNTANT MEMBER
AND
SHRI RAJPAL YADAV, JUDICIAL MEMBER
ITA No. 5722/Del/2010
(ASSESSMENT YEAR-2006-07)
Noble Resources & Trading Vs Assistant Commissioner of Income
India Pvt. Ltd., 1A-D, Tax, Circle 13(1), 406, C. R
Vandana Building, 11 Tolstoy Building,
Marg, New Delhi-110001 New Delhi
(APPELLANT) (RESPONDENT)
PAN No. AAACA0443N
Assessee by: Shri Aseem Chawla
Revenue by: Shri Peeyush Jain
Date of Hearing 3.3.2014
Date of Pronouncement 5.3.2014
ORDER
PER R. S. SYAL, AM:
This appeal by the assessee arises out of the order dated
18.10.2010 passed by the Assessing Officer u/s 143(3) r.w.s
144C(13) of the Income Tax Act, 1961 (hereinafter called `the
Act') in relation to the assessment year 2006-07.
2. The only effective issue raised in this appeal through various
grounds is against the making of the addition amounting to Rs.
7,23,59,322/- due to Transfer Pricing Adjustment proposed by the
Transfer Pricing Officer u/s 92CA(A) of the Act.
2 ITA No. 5722/Del/2010
Noble Resources & Trading India Pvt. Ltd.
3. Briefly stated the facts of the case are that the assessee is a
part of Noble Grain Group which offers a range of highly
diversified agricultural commodity products and technical services
in connection therewith. Total International transactions
undertaken by the assessee have been reported on page 2 of the
TPO's order. The dispute about the Arm's Length Price (ALP) is
confined to two sets of transactions, viz., `Sale of traded goods'
amounting to Rs. 71,06,26,003/- and `Purchase of traded goods'
amounting to Rs. 17,28,82,215/-. The assessee benchmarked these
international transactions by using Comparable Uncontrolled Price
(CUP) method as the most appropriate method. `Sale of traded
goods' comprises of export of Soyabean meal, Sesame seed, Iron
ore and Edible Oil. `Purchase of Trade good' consists of import of
Edible Oil. The assessee contended that the import and export
made by it were at ALP. In support of its contention, the assessee
relied on price publications of Solvent Extractor's Association of
India; Price publications of DBL Trade Corporation; and certain
third party contracts. The TPO noticed that the CUP data furnished
by the assessee did not contain certain relevant factors necessary
for determination of ALP such as payment terms, credit period and
certain parties invoicing at CIF basis whereas CUP is available at
FOB. In such background of facts, the TPO held that CUP method
was not applicable and the ALP was required to be done under
Transactional Net Martin Method (TNMM). He computed the
3 ITA No. 5722/Del/2010
Noble Resources & Trading India Pvt. Ltd.
assessee's PLI of OP/Sales at (-) 5.10%. Certain comparables
were chosen whose mean of OP/Sales was worked out at 3.09%.
That is how the addition of Rs. 7.23 crores was made towards the
international transactions of sale and purchase of traded goods. The
assessee challenged the draft order before the Dispute Resolution
Panel (DRP). The DRP vide its order dated 20.9.2010 rejected the
assessee' contentions and upheld the addition proposed in the draft
order. Thus the final order was passed by the A.O u/s 143(3) r.w.s.
144C(13) making addition of Rs. 7.39 crores. The assessee is
aggrieved against the addition.
4. We have heard the rival submissions and perused the relevant
material on record. It is observed that the foremost point of
difference between the assessee and the Revenue is the application
of the most appropriate method and then the selection of
comparables under TNMM. Whereas the assessee adopted CUP as
the most appropriate method, the Revenue rejected it and insisted
on the application of TNMM. The viewpoint canvassed by the
Revenue in such rejection is that the necessary details required for
the application of CUP method were not forthcoming from the
assessee's side. Several Benches of the Tribunal has held that
CUP is the most appropriate method in case of trading transactions
provided the uncontrolled transactions relied by the assessee are
really comparable and necessary data requiring adjustments, if any,
4 ITA No. 5722/Del/2010
Noble Resources & Trading India Pvt. Ltd.
is available. Internal CUP has been held as more appropriate than
the external CUP. The net effect of this discussion is that if the
assessee's similar transactions with non Associated enterprises are
available then it is always better to go by such internally
comparable uncontrolled transactions for benchmarking the price
charged/paid from/to its associated enterprises in comparable
transactions. At the same time, it is relevant to observe that if
complete data of such comparable uncontrolled transaction is not
available, then the Revenue is at liberty to discard the CUP method
and resort to any other suitable method.
5. Adverting to the facts of the instant case, it is seen that the
details of its export transactions of Soyabean meal to its AEs is
available on pages 64 & 65 of the paper book. Major transactions
are of export to AE in Singapore and few transactions are of export
to its AE in Indonesia. Page 135 of the paper book is a copy of
Invoice dated 21.3.2006 pursuant to contract dated 2.3.2006 in
which price of Rs. 193 per MT has been charged. The assessee also
supplied similar products to its non-AE in Singapore, a copy of
which is available on page 287 of the paper book. Similarly, the
details regarding export of Sesame seed made to its AEs is
available on page 66 of the paper book, for which the ld. AR
contended that though no actual comparable uncontrolled
transactions was available but the assessee could show the price
5 ITA No. 5722/Del/2010
Noble Resources & Trading India Pvt. Ltd.
actually charged by comparables. As regards the export of Iron ore
of its AEs, the detail of which is available on page 67 of the paper
book, the assessee tried to show that its invoices to its AE were
comparable with that charged from non-AEs. In the like manner
the assessee tried to show that the comparable data of non-AEs
was very much available, which the authorities below have
refused to look into. From the order passed by the DRP, we find
that there is no worthwhile discussion about the objections taken
by the assessee in Form No. 35A. It can be seen from the DRP's
order that it is summary of the view canvassed by the AO/TPO for
making addition of Rs. 7.23 crores without properly noting or
dealing with the objections raised by the assessee. The Tribunal in
Evalueser Co. Pvt. Ltd. Vs Income-tax Officer (2014) 134 ITD 546
(Delhi) has restored the matter to the file of DRP for passing a
detailed order when the objections of the assessee were not dealt
with. The ld. AR contended that the assessee has full details to
satisfy the authorities below as regards the application of CUP
method and hence the matter should be restored to the file of TPO
instead of DRP, who had also failed to appreciate the contentions
made before him. We can observe from the order of the TPO as
well that though detailed submissions were filed before him, but
those have not been appropriately considered while proposing the
addition of Rs. 7.23 crores. The ld. DR, though relied on the
impugned order but suggested that if the matter was to be sent
6 ITA No. 5722/Del/2010
Noble Resources & Trading India Pvt. Ltd.
back then it should go to the TPO instead of DRP. Considering the
entire conspectus of the case, we are of the considered opinion that
the ends of justice would meet adequately if the impugned order is
set aside and the matter is restored to the file of TPO. We order
accordingly. However, we do not approve, in principle, the
contention of the ld. AR that quotations etc. or the price as per
some publications can be considered for benchmarking the
assessee's international transactions under the CUP method. The
comparison is required to be done with the actual uncontrolled
transactions and not quotations etc. If the assessee succeeds in
providing appropriate data relevant for comparison under the CUP
method, then the TPO should determine the ALP under the CUP
method. If however, it turns out that necessary details furnished by
the assessee are incomplete or not relevant, then the TPO may
proceed with any other appropriate method. Needless to say the
assessee will be allowed a reasonable opportunity of being heard in
such de-novo proceedings and will also have full right to place any
fresh material in its support.
6. The other grounds are either general or consequential, which
do not require any adjudication.
7. In the result, the appeal of the assessee is allowed for statistical
purposes.
7 ITA No. 5722/Del/2010
Noble Resources & Trading India Pvt. Ltd.
Order pronounced in the open Court on 5/3/2014.
Sd/- Sd/-
(RAJPAL YADAV) (R. S. SYAL)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 5/3/2014
*Subodh*
Copy forwarded to:
1.Appellant
2.Respondent
3.CIT
4.CIT(Appeals)
5.DR: ITAT
ASSISTANT REGISTRAR
Initial
Date
1. Draft dictated on 3.3.2014 PS
2. Draft placed before author 3.3.2014 PS
3. Draft proposed & placed before the second JM/AM
member
4. Draft discussed/approved by Second Member. JM/AM
5. Approved Draft comes to the Sr.PS/PS PS/PS
6. Kept for pronouncement on PS
7. File sent to the Bench Clerk PS
8. Date on which file goes to the AR
9. Date on which file goes to the Head Clerk.
10. Date of dispatch of Order.
*
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