TWILIGHT JEWELLERY PVT. LTD. Vs. DEPUTY COMMISSIONER OF INCOME TAX
INCOME TAX APPELLATE TRIBUNAL
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AMIT SHUKLA,JM. -
(1.) THIS appeal has been preferred by the assessee against final assessment order dated 30.01.14, passed in pursuance of directions given by the Dispute Resolution Panel -II (DRP), Mumbai for the quantum of
assessment passed under section 143(3) read with section 144C(13) for the assessment year 2009 -10.
The grounds of appeal raised by the assessee are as under: -
"1. The assessment order passed by the learned Assessing Officer u/s 143(3) r.w.s. 144C(13) pursuant to the directions of learned DRP is bad in law and against the principles of natural justice. The directions issued by the learned DRP are in violation of the principles of natural justice.
2. The learned DRP erred in not holding that, under the facts and circumstances of the case, comparable uncontrolled price method (CUP) is the most appropriate method (MAM) in determining the arm's length price of the assessee. The learned DRP ought to have appreciated the fact that there is an internal CUP available for the year under consideration hence, CUP is the MAM to determine the arm 's length price of the assessee.
3. The learned DRP erred in not rejecting the comparable companies selected by the TPO while adopting TNMM method as the same were not comparable with that of the assessee.
4. The learned DRP erred on facts and in law in confirming the addition of 3,95,47,237/ - on account of transfer pricing adjustment. "
(2.) AT the outset, ld. counsel for the assessee, Shri Vijay Mehta, submitted that, similar issue had also come up for consideration before the Tribunal in the assessee's own case for the assessment year 2008 -
09 in ITA No.7281/M/12, wherein the Tribunal vide order dated 23.10.13 has set aside the same issue back to the file of the Assessing Officer/TPO for examining the entire transfer pricing adjustment, afresh.
Since similar facts are there in this year also, therefore this appeal should also be set aside to the file of
the Assessing Officer for a fresh adjudication. The ld. D.R. also has admitted that on similar facts the
matter has been restored back to the file of the TPO as has been submitted by the ld. counsel.
(3.) THE brief facts are that the assessee is engaged in the business of manufacturing of diamonds and precious stone -studded jewellery, which is made as per the designs supplied by its associated enterprise
(AE) and the same is exported back to the AE in USA. During the year, the assessee has entered into
following international transactions with the AE: -
a) Import of gold, diamond, platinum Rs.33,95,08,954/ - etc.
b) Export of finished jewellery items Rs.45,85,29,789/ -
3.1 The assessee's case has been that it is only doing a job work for the AE and, as per the arrangement, it is recovering the labour charges from them. The purchase/import of the raw material from the AE is without any mark up and the export prices are fixed after adding up labour charges. The business model of the assessee is entirely different which has no comparables for benchmarking and therefore the assessee's margin on account of labour charges should be treated as at arm's length. The Assessing Officer held that the assessee has not submitted transfer pricing study report for benchmarking its international transaction and therefore TNMM should be applied as the most appropriated method, after taking OP/OC as PLI. Thereafter the TPO searched for the comparable companies engaged in jewellery manufacturing business during the financial year 2008 -09 and shortlisted 23 comparables with an average mean of 9.22%. Since assessee's PLI was 0.55%, therefore transfer pricing adjustment was made at Rs.3,95,47,237/ -.
Before the DRP, the assessee has made detailed objections, not only with regard to the most appropriate method adopted by the TPO but also the comparables chosen by the Assessing Officer. Before
the DRP, the assessee has contended that cost plus method should be adopted by the Assessing Officer.
However, the assessee's entire objections have been rejected.;
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