Ship chartering with AE - CUP method how read and applied

Facts :

Assessee was in the business of plying ships and chartered vessels from its Singapore AE at quoted rates which was benchmarked on CUP method (Comparable Uncontrolled Price) under TP provisions. The benchmarking was done adopting market rates vis a vis rates quoted by the AE. Issue arose on the manner how the CUP needs to be arrived at. Stand of the assessee was that the actual tonnage carried and the actual Fx rate as on the date of shipment, while the revenue benchmarked it based on the date of agreement and the expected tonnage to be carried. This went in appeal to ITAT where in assessee produced a detailed working explaining the difference.

Held in favour of the assessee that the exchange rate needs to be applied on the date of the shipment based on the actual tonnage carried out instead of the the exchange rate on the agreement and on the expected tonnage.

Ed. Note : The enclosed tabulation makes it a worthwhile reading.

Case: Tolani Shipping Co. Ltd. v. DCIT 2023 TaxPub(DT) 2276 (Mum-Trib)