Appeal details
Counselvise Citation
[2017] 130 COUNSELVISE.COM (IT) 9255 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 11 month(s) 17 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
06-02-2017
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
I
Next Hearing Date
12-01-2017
Assessment Year
2010-2011
Appeal Filed On
18-02-2015
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD I BENCH BEFORE: R. P. TOLANI , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ERHARDT + LEIMR (INDIA) PVT. LTD, SURVEY NO. 252/1 & 2, NEAR ARVEE DENIM, SARKHEJ - BAVLA HIGHWAY, VILLAGE SARI, AHMEDABAD - 382415 PAN: AAACE2657G (APPELLANT) VS THE DCIT, CIRCLE - 4, (NOW REDESIGNED AS DEPUTY COMMISSIONER OF INCOME T AX, CIRCLE - 2(1)(1), AHMEDABAD (RESPONDENT) REVENUE BY : S H RI DILEEP KUMAR , D . R. ASSESSEE BY: S H RI N. B. SHAH , A.R. DATE OF HEARING : 12 - 01 - 2 017 DATE OF PRONO UNCEMENT : 06 - 02 - 2 017 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS ASSESSEE S APPEAL FOR A.Y. 2012 - 13 , AR IS ES FROM ORDER OF THE CIT(A) - 2, VALSAD DATED 13 - 01 - 2015 IN APPEAL NO. CIT(A) - 2/DCIT/CIR.4 /1 0 4 /13 - 14 , IN PROCEEDINGS UNDER SEC TION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . I T A NO . 352 / A HD/20 15 A SSESSM ENT YEAR 2010 - 11 I.T.A NO. 352 /AHD/20 15 A.Y. 2010 - 11 PAGE NO ERHARD T + LEIMER (INDIA) PVT. LTD. VS. DCIT 2 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1.1 IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 2, AHMED ABAD GROSSLY ERRED IN RETAINING/CONFIRMING A PART OF THE DISALLOWANCE OF MADE BY THE AO ON ACCOUNT OF UPWARD ADJUSTMENT IN RESPECT OF TRANSACTIONS WITH ASSOCIATED ENTERPRISES. 1.2 IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW , THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 2, AHMEDABAD GROSSLY ERRED IN RETAINING/CONFIRMING A PART OF THE DISALLOWANCE BY ADOPTING THE AMOUNT OF DISCOUNT ALLOWED IN BULK PURCHASES AT 5% AS AGAINST THE APPELLANT'S CLAIM THAT SUCH DISCOUNT AMOUNTED TO 15%. IT IS THEREFORE PRAYED THAT WHILE DETERMINING THE ARM LENGTH PRICE IN RESPECT OF SALE OF CLOTH GUIDER, THE ELEMENT OF DISCOUNT ON BULK VOLUME PURCHASES MAY BE TAKEN AT 15% AS AGAINST 5% ADOPTED BY THE LEARNED CIT (A). 2.1 IN THE FACTS AND CIRCUMS TANCES OF THE CASE AS WELL AS IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 2, AHMEDABAD GROSSLY ERRED IN RETAINING/CONFIRMING A PART OF THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF UPWARD ADJUSTMENT IN RESPECT OF TRANSACTIONS WITH ASSOCIATED E NTERPRISES, WITHOUT GRANTING ADJUSTMENT FOR THE COST OF WARRANTY PROVIDED TO NON - AE SALES WHICH WORKS OUT TO RS.404/ - PER PAIR. 2.2 IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 2, AHMEDABAD GROSSLY ERRED IN RETAINING/CONFIRMING A PART OF THE DISALLOWANCE, BY DENYING ADJUSTMENT ON ACCOUNT OF WARRANTY WITH THE OBSERVATION THAT 'THE CLAIM OF THE APPELLANT THAT IT IS NOT INCURRING ANY EXPENDITURE IN RESPECT OF EXPORT SALES IS NOT SUPPORTED BY AN Y DOCUMENTARY EVIDENCES.' THE APPELLANT SUBMITS THAT IT HAS NOT INCURRED ANY COST ON ACCOUNT OF WARRANTY IN RESPECT OF SALES MADE TO THE ASSOCIATED ENTERPRISES, WHICH IS EVIDENT FROM THE AUDITED PROFIT & LOSS ACCOUNT AND BALANCE SHEET WHICH WAS SUBMITTED B EFORE THE AO IN THE COURSE OF ASSESSMENT PROCEEDINGS AND THEREFORE THE OBSERVATION MADE BY THE LEARNED CIT (A) IS FACTUALLY INCORRECT. IT IS THEREFORE PRAYED THAT THE ADDITION RETAINED/CONFIRMED BY THE CIT (A) MAY PLEASE BE DELETED. I.T.A NO. 352 /AHD/20 15 A.Y. 2010 - 11 PAGE NO ERHARD T + LEIMER (INDIA) PVT. LTD. VS. DCIT 3 3. IT IS SUBMITTED THAT THE TRANSACTIONS OF SALE OF CLOTH GUIDERS MADE BY THE COMPANY WITH ITS AE HAVE BEEN MADE AT ALP COMPUTED IN ACCORDANCE WITH THE REGULATIONS PROVIDED IN THE INCOME TAX ACT, 1961 READ WITH APPLICABLE RULES AS PROVIDED IN THE INCOME TAX RULES, 1962 AND THEREFORE, THE ADJUSTMENT OF RS.4,95,060/ - WHICH WAS WRONGLY MADE BY THE AO AND PARTLY CONFIRMED/RETAINED BY THE CIT(A) IS REQUIRED TO BE DELETED IN TOTO. IT IS THEREFORE, PRAYED THAT THE ADDITION/DISALLOWANCE RETAINED/CONFIRMED BY THE CIT (A) MAY PLEASE BE DELETED. ALL THE GROUNDS OF APPEAL ARE INTERCONNECTED SO THEY ARE DECIDED TOGETHER AS UNDER: - 3. IN THIS CASE, ASSESSEEE HAD FILED RETURN OF INCOME DECLARING INCOME OF RS. 88,10,720/ - ON 23 RD SEPTEMBER, 2010. SUBSEQUENTLY THE CASE WAS SELECTED FOR THE SCRUTINY BY ISSUING OF NOTICE UNDER SECTION 143(2) OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDING , THE ASSESSEE FILED A TRANSFER P RICING STUDY REPORT AND SUCH OTHER DOCUMENT REGARDING ARM S LENGTH P RICE COMPUTED IN RESPECT OF THE INTERNATIONAL TRANSACTIONS. T HE ASSESSING OFFICER HAS NOT ACCEPTED THE CO N CLUSION DRAWN BY THE ASSESSEE IN RESPECT OF ARM'S - LENGTH NATURE OF TRANSACTION . THEREFORE , HE ISSUED SHOW CAUSE NOTICE IN RESPECT OF BULK QUANTITY DISCOUNT OF 15% PROVIDED ON THE SALE MADE TO THE ASSOCIATE ENTERPRISE AND NON DEDUCTION OF COST OF WARRANTY ON SALE MADE TO AES AS COMPARED TO NON AES . DURING THE COURSE OF A SSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAD MADE SALE OF 185 PAIRS OF CLOTH GUIDERTO TO THE AE ON WHICH ASSESSEE HAD OFFERED DISCOUNT @ 15% WHEREAS NO DISCOUNT I.T.A NO. 352 /AHD/20 15 A.Y. 2010 - 11 PAGE NO ERHARD T + LEIMER (INDIA) PVT. LTD. VS. DCIT 4 WAS OFFERED ON THE SALE MADE TO THIRD PARTIES. IN RESPECT OF SALE MADE TO THE ASSOCIATED ENTERPRISES, THE ASSESSEE HAD SUBMITTED THAT THE VOLUME OF SALE TO THE ASSOCI ATED ENTERPRISES WAS 185 P AIRS WHEREAS THE MAXIMUM SALES MADE TO THE THIRD PARTY WAS NOT IN EXCE SS OF 50 PAIR S. HE FURTHER STATED THAT IN ABSENCE OF ANY LARGE CUSTOMER, THERE IS NO ACTUAL COMPARABLE DISCOUNT THAT CAN BE MADE TO THE THIRD PARTIES. THE ASSESSING OFFICER FURTHER STA TED THAT THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE/AVAILABLE AGREEMENTS WHICH COULD JUSTIFY THE EXPENDITURE OF DISCOUNT ADJUSTMENT MADE BY THE ASSESSEE AND FURTHER STATED THAT THE INITIAL ONUS FOR MAINTENANCE OF DOCUMENTATION IN RESPECT OF INTERNATIONAL T RANSACTION LI ES WITH THE ASSESSEE. THE ASSESSING OFFICER CALCULATED AN ARM S LENGTH PRICE IN E CASE OF SALES OF CLOTHES GUIDERS TO THE ASSOCIATE ENTERPRISE AS UNDER : - PARTICULARS AMOUNTS (RS) AVERAGE NON AE PRICE 32313 LESS: COMMISSION 1616 EPC BENE FIT 219 AIR FILTER COST NOT SUPPLIED TO AES 1250 ADDITIONAL SELLING EXPENSES 1795 NET SELLING PRICE 27434 AVERAGE FOB PRICE CHARGED TO AE 24489 I.T.A NO. 352 /AHD/20 15 A.Y. 2010 - 11 PAGE NO ERHARD T + LEIMER (INDIA) PVT. LTD. VS. DCIT 5 ADD: DUTY DRAWBACK 269 NET SELLING PRICE 24758 THE ASSESSING OFFICER CALC ULATED THE TOTAL ADJUSTMENTS OF RS.4, 95 , 060 / - (RS.2 , 676/ - BEI NG THE DIFFERENCE FOR 185 PAIRS ). 4. REGARDING COST OF WARRANTY D URING THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE AMOUNT CORRESPONDING TO THE COST OF WARRANTY WAS INCLUDED IN THE SALE PRICE C HARGED TO THE DOMESTIC CUSTOMER BY THE ASSESSEE. HE F URTHER NOTICED THAT WARRANTY COST WAS NOT INCLUDED IN THE PRICE RECEIVED BY THE ASSESSEE FROM ITS ASSOCIATED ENTERPRISES , THEREFORE, ADJUSTMENT TO THE EXTENT OF RS. 608/ - PER UNIT UNDER WAS SOUGHT ON T HIS HEAD. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSEE HAD SUBMITTED TO THE ASSESSING OFFICER THAT THE WARRANTY COST WAS NOT INCLUDED IN THE SALE PRICE CHARGED FROM THE ASSOCIATED ENTERPRISES BECAUSE THE COST REPAIRING THE FA ULT IF ANY IN THE CASE OF AE WAS BORNE BY THE AE ITSELF. THE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE BY STATING THAT IN THE ABSENCE OF ANY DETAILS PROVIDED BY THE ASSESSEE IT WAS NOT POSSIBLE TO ASCERTAIN A CORRESPONDING REDUCTION IN PRICE WHICH IDENTICALLY MAY BE MORE THAN RS. 608/ - AS CONSIDERED BY THE ASSESSEE IN THE CASE OF DOMESTIC SALE. CONSIDERING THESE FACTS THE ASSESSING OFFICER HAS NOT GRANTED ANY ADJUSTMENT ON THIS ASPECT IN THE ABSENCE OF SUPPORTING DETAILS. AGGRIEVED AGAINST THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE I.T.A NO. 352 /AHD/20 15 A.Y. 2010 - 11 PAGE NO ERHARD T + LEIMER (INDIA) PVT. LTD. VS. DCIT 6 PREFERRED APPEAL B E FORE THE LD. CIT(A). THE LD. CIT(A) HELD THAT REGARDING BULK DISCOUNT MADE TO THE ASSOCIATED ENTERPRISE, THE ASSESSING OFFICER HIMSELF HAS ACCEPTED THAT THE ADJUSTMENT OF 5% DISCOUNT ON ACCOUNT OF WHOLE SALE CAN BE ALLOWED WHICH WAS ALSO ALLOWED IN ASSESSMENT YEAR 2008 - 09, THEREFORE, LD. CIT(A) HAS ALLOWED A DISCOUNT OF 5% WHICH COME S TO RS. 1289 FOR DETERMINING OF ALP IN RESPECT OF SALE OF CLOTHES GUIDER. 4.1 REGARDING COST OF WARRANTY THE LD. CI T(A) STATED THAT ASSESSING HAS NOT PRODUCED ANY SALE AGREEMENT L IN SUPPORT OF ITS CLAIM TO SHOW THAT NO WARRANTY EXPENDITURE WAS SUBSEQUENTLY INCURRED BY THE ASSESSEE ON THE SALE MADE TO THE AE. THEREFORE, THE ADJUSTMENT MADE BY THE ASSESSING OFFICER TO THE ARM S LENGTH PRICE WAS UPHELD. THE RELEVANT PART OF THE DECISION OF THE LD. CIT(A) IS REPRODUCED AS UNDER: - 4.3 DECISION: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT. THE AO HAS MADE A TRANSFER PRICING ADJUSTMENT TO THE INTERNATIONAL TRANSACTIONS UNDERTAKEN BY THE COMPANY AFTER DETERMINING THE ARM S LENGTH ONCE. THE APPELLANT HAS SOLD CLOTH GUIDERS TO THE ASSOCIATED ENTERPRISES AND THE PRICE - CHARGED FROM ASSOCIATED ENTERPRISE S WERE LESS THAN THE PRICE CHARGED BY THE APPELLANT IN THE INDIAN MARKET. THE APPELLANT EXPLAINED TO THE AO THAT IT WAS OFFERING A BULK VOLUME DISCOUNT TO THE AES AS THEY WERE BUYING IN BULK AND THE AES ARE NOT COVERED IN THE WARRANTY, WHICH IS NORMALLY TH ERE FOR THE DOMESTIC CUSTOMER. ACCORDINGLY, THE PRICE CHARGED FROM THE AES WERE LOWER. THE AO DID NOT ACCEPT THE CONTENTION ON THE APPELLANT AND MADE THE ADJUSTMENT TO THE SALE PRICE BY DETERMINING THE CORRECT ARM'S - LENGTH PRICE AFTER MAKING ADJUSTMENT ON ACCOUNT OF BULK DISCOUNT AND WARRANTY. I.T.A NO. 352 /AHD/20 15 A.Y. 2010 - 11 PAGE NO ERHARD T + LEIMER (INDIA) PVT. LTD. VS. DCIT 7 THE APPELLANT ON THE OTHER HAND HAS SUBMITTED THAT IF IS A CONSISTENT PRACTICE OF THE APPELLANT COMPANY TO OFFER VOLUME DISCOUNT ON THE SALES IN THE DOMESTIC MARKET. THE PERSON BUYING MORE THAN 15 UNITS IN ONE YEAR IS OFFERED A DISCOUNT OF 7% ON THE ENTIRE SALE VALUE. SIMILARLY REGARDING THE PROVISION FOR WARRANTY THE APPELLANT HAS SUBMITTED THAT THERE IS NO WARRANTY IN RESPECT OF THE EXPORT SALES AND ACCORDINGLY NO EXPENDITURE IS INCURRED FOR WARRANTY. THE APPELLANT H AS ACCORDINGLY ADJUSTED THE AMOUNT OF W ARRANTY COSTS WHICH WAS RS. 404/ - PER PAIR AND ACCORDINGLY DETERMINED THE PRICE. THE APPELLANT HAD ON THE BASIS OF PAST EXPERIENCE AND THE ACTUAL EXPENDITURE DETERMINED THE AMOUNT OF ADJUSTMENT. ON A CAREFUL CONSIDERA TION OF THE FACTS OF THE CASE, IT IS NOTED THAT THE AO DID NOT ACCEPT THE CONTENTION REGARDING BULK VOLUME DISCOUNT AS THE APPELLANT DID NOT PRODUCE ANY DOCUMENTARY EVIDENCE IN SUPPORT OF ITS CLAIM. THE AO HAS RELIED ON THE JUDGMENT OF HONOURABLE ITAT BANG ALORE BENCH IN THE CASE OF AZTEC SOFTWARE AND TECHNOLOGY SERVICES LTD (SUPRA), IN WHICH IT WAS HELD THAT THE INITIAL ONUS LIES ON THE APPELLANT TO JUSTIFY THE ARM'S - LENGTH NATURE OF THE TRANSACTION. AS THE APPELLANT HAS NOT GIVEN ANY SUPPORTING EVIDENCE IN SUPPORT OF ITS CLAIM, THE ACTION OF THE AO APPEARS TO BE JUSTIFIED. IT IS ALSO NOTED THAT IN THE ASSESSMENT YEAR 2008 - 09, THE ISSUE WAS ALSO EXAMINED BY DRP AND ON SIMILAR REASONS THE ISSUE OF DISCOUNT WAS NOT ACCEPTED BY THE HONOURABLE DRP. HOWEVER IT IS NOTED THAT THE AO HAS HIMSELF ACCEPTED, THAT THE ADJUSTMENT OF 5% DISCOUNT ON ACCOUNT OF BULK SALE CAN BE ALLOWED, WHICH WAS ALLOWED IN A. Y. 2008 - 09. IT IS ALSO NOTED THAT A VOLUME DISCOUNT OF 5% HAS ALSO BEEN ALLOWED BY THE TPO IN THE SUBSEQUENT ASS ESSMENT YEAR I.E. 201 I - 12. CONSIDERING THESE FACTS AND CIRCUMSTANCES AND ALSO NOTING THE FACT THAT SOME DISCOUNT WOULD NORMALLY BE ALLOWED BY THE MANUFACTURER IN CASE A PERSON IS BUYING IN BULK, A DISCOU NT OF 5% WHICH WOULD COME TO RS. 1289/ - SHOULD BE A LLOWED BY DETERMINING THE ALP IN RESPECT OF SALE OF CLOTH GUIDER. REGARDING THE ADJUSTMENT ON ACCOUNT OF WARRANTY IT IS NOTED THAT THE APPELLANT HAS NOT GIVEN ANY CREDIBLE DOCUMENTARY EVIDENCE REGARDING THIS ADJUSTMENT. THE CLAIM OF THE APPELLANT THAT IT I S NOT INCURRING ANY EXPENDITURE IN RESPECT OF THE EXPORT SALES IS NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCE. THE APPELLANT HAS ALSO NOT PRODUCED ANY SALE AGREEMENT OR SALE BILL IN SUPPORT OF IFS CLAIM TO SHOW THAT NO WARRANTY EXPENDITURE IS SUBSEQUENTLY IN CURRED BY THE APPELLANT ON THE SALES MADE TO THE AE. ACCORDINGLY, IN VIEW OF THESE FACTS AND CIRCUMSTANCES THE ADJUSTMENT MADE BY THE AO TO THE ARM'S - LENGTH PRICE IS UPHELD ON THIS AMOUNT. I.T.A NO. 352 /AHD/20 15 A.Y. 2010 - 11 PAGE NO ERHARD T + LEIMER (INDIA) PVT. LTD. VS. DCIT 8 THE AO IS ACCORDINGLY DIRECTED TO RECALCULATE THE ARM'S - LENGTH PRIC E AND ADJUSTMENT BY ALLOWING THE DEDUCTION OF 5% ON ACCOUNT OF TH E BULK DISCO UNT. THE RELATED GROUND OF APPEAL ARE ACCORDINGLY, PARTLY ALLOWED. 5. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LEARNED COUNSEL SUBMITTED THAT THE CO - ORDINATE BE NCH OF ITAT AHMEDABAD HAD DECIDED IN TH E CASE OF THE ASSESSEE ON IDENTICAL ISSUES FOR ASSESSMENT YEAR 2007 - 08 & 2008 - 09 ITA NO. 3298/AHD/2011 AND THESE TWO ISSUES WERE REFERRED BACK TO THE TRANSFER PRICING OFFICER FOR MAKING APPROPRIATE ADJUSTMENT AS PER LAW. ON THE OTHER HAND LD. DEPARTMENTAL REPRESENTATIVE RELIED ON T H E ORDER OF CIT(A). 6 . WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. REGARDING THE BULK DISCOUNT GRANTED TO THE AES, W E NOTICED THAT THE ASSESSING OFFICER STATED THAT THE AS S ESSEE HAD NOT PRODUCED ANY EVIDENCE/AGREEMENT WHICH COULD SHOW THAT PUR CHA SE OF COMMITTED VOLUME BY THE ASSOCIATED ENTERPRISE NECESSITATING GRANT OF BULK DISCOUNT AND THE EXPLANATION OF THE ASSESSING THAT IT WAS OFFERING A BULK VOLUME DISCOUNT TO THE ASSOCIATE ENTERPRISE AS THEY WERE BUYING IN BULK . REGARDING COST OF WARRANTY, THE ASSESSEE HAS STATED THAT THE AMOUNT CORRESPONDING TO THE COST OF WARRANTY WAS INCLUDED IN THE SALE PRICE CHARGED TO DOMESTIC CUSTOMER WHILE THE SAME WAS NOT INCLUDED IN THE PRICE RECEIVED FROM THE AE. WE FIND THAT THE CO - ORDINATE BENCH OF THE ITAT HAS PRONOUNCED THE ORDER IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2007 - 08 AND FOR ASSESSMENT YEAR 2008 - 09 ITA NO. 3298/AHD/2011 RECENTLY ON I.T.A NO. 352 /AHD/20 15 A.Y. 2010 - 11 PAGE NO ERHARD T + LEIMER (INDIA) PVT. LTD. VS. DCIT 9 27/12/2016 VIDE WHICH THE SAM E ISSUE HAS BEEN SENT BACK TO THE TPO FOR DECIDING AFRESH. THE RELEVANT PART OF THE DECISION OF THE COORDINATE BENCH ON THESE TWO IDENTICAL ISSUES ARE REPRODUCED AS UNDER: - 15. LD. COUNSEL REPRESENTING ASSESSEE INVITES OUR ATTENTION TO THE FACT THAT IT HA D SOLD 600 & 35 UNITS OF CLOTH GUIDERS TO ASSOCIATE ENTERPRISE AS AGAINST 30 & 3 UNITS TO THE THIRD PARTIES. HIS SUBMISSION IS THAT THE IMPUGNED DIFFERENCE BETWEEN SALE PRICE AS INDICATED IN PRECEDING PARAGRAPH HAS ARISEN BECAUSE OF HUGE DIFFERENCE IN VOL UME OF BUSINESS WHICH DOES NOT INCLUDE WRITTEN CONTRACTS ALL THE TIME. THE ASSESSEE FURTHER SEEKS TO HIGHLIGHT THE FACT THAT IT HAS TO OFFER SPECIAL DISCOUNTED PRICES TO ASSOCIATE ENTERPRISES WHO HAPPEN TO BE PURCHASER OF HUGE QUANTITY AS PER ANNEXURE 4 A TTACHED WITH FORM 35A. 16. THE ASSESSEE S NEXT ARGUMENT IS THAT IT HAS TO PROVIDE WARRANTIES TO LOCAL PURCHASERS AS CALCULATED AT THE RATE OF RS.608/ - WHICH IS NOT THE CASE WITH RESPECT TO ITS ASSOCIATE ENTERPRISES. LEARNED COUNSEL ACCORDINGLY SUBMITS THAT THE LOWER AUTHORITIES OUGHT TO HAVE INCLUDED THE ABOVE TWO FACTORS FOR THE PURPOSE OF MAKING ADJUSTMENTS BEFORE ARRIVING AT THE ALP ADJUSTMENT IN QUESTION. 17. LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTED THE LOWER AUTHORITIES ACTION. HE HO WEVER FAILS TO REBUT THE FACT THAT THE ASSESSEE S BULK SALES TO ITS ASSOCIATE ENTERPRISES ARE MUCH VOLUMINOUS AS COMPARED TO THIRD PARTIES. THE SAID GAP IS TO THE TUNE OF 1/20 TH IN CASE OF FORMER VARIETY OF CLOTH GUIDER AND ALMOST 1/10 TH IN LATTER CATEGOR Y (SUPRA). THE REVENUE FURTHER IS UNABLE TO DISPUTE THE FACT THAT ASSESSEE HAS BEEN PROVIDING WARRANTY COST TO ITS LOCAL PURCHASERS WHICH HAS FURTHER SHRUNK ITS PROFIT MARGINS IN QUESTION. WE THUS PRIMA FACIE AGREE WITH ASSESSEE S ABOVE TWO ARGUMENTS IN PRINCIPLE AND LEAVE IT OPEN FOR THE LD. TRANSFER PRICING OFFICER TO MAKE APPROPRIATE ADJUSTMENTS AS PER LAW AFTER AFFORDING ADEQUATE OPPORTUNITY OF HEARING IN CONSEQUENTIAL PROCEEDINGS. THE ASSESSEE S LATTER SUBSTANTIVE GROUND IS REMITTED BACK TO THE TRAN SFER PRICING OFFICER ACCORDINGLY. I.T.A NO. 352 /AHD/20 15 A.Y. 2010 - 11 PAGE NO ERHARD T + LEIMER (INDIA) PVT. LTD. VS. DCIT 10 6.1 THEREFORE , KEEPIN G IN VIEW THE SIMILAR FACTS AND IDENTICAL ISSUES INVOLVED DURING THE YEAR UNDER CONSIDERATION AND ASSESSMENT YEAR 2007 - 08 AND ASSESSMENT YEAR 2008 - 09 ITA NO. 3298/AHD/2011 , IN OUR CONSIDERED OPIN ION IT IS APPROPRIATE TO RESTORE TH ESE ISSUE S TO THE TPO FOR DECIDING AFRESH ACCORDING TO THE DIRECTION ISSUED BY THE CO - ORDINATE BENCH IN ITAT ORDER AS MENTIONED SUPRA IN THIS ORDER AFTER PROVIDING ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE IN CONSE QUENTIAL PROCEEDINGS. 7. IN THE RESULT , THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PR ONOUNCED IN THE OPEN C OURT ON 06 - 02 - 201 7 SD/ - SD/ - ( R. P. TOLANI ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 06 /02 /2017 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,
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