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| The Tax Publishers2020 TaxPub(DT) 5070 (Visakhapatnam-Trib) INCOME TAX ACT, 1961
Section 92C
Assessee purchased raw material from its AE and AE supplied raw material to assessee on back-to-back basis without marking up for any costs or expenses or profit. AE had made purchases from third party vendor which was uncontrolled transaction and supplies made by the AE to assessee were controlled transaction. Price charged by AE to assessee was less or equal to the uncontrolled transaction. TPO also did not bring any material to show that internal CUP was not acceptable or any restrictions were placed by the Act to consider internal CUP as comparable. It was also undisputed fact that supplier of material was not related party of AE. Hence, there was no reason to reject transfer pricing study of assessee and to accept CUP as most appropriate method in respect of purchases.
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Transfer pricing - Determination of ALP - MAM - Import of goods from AE--TNMM v. CUP
Assessee company imported the raw material from AEs for the purpose of its manufacturing activity. AEs had undertaken corresponding back to back purchase of same raw materials from third party suppliers. Thus, assessee considered internal CUP as the MAM and declared the transaction to be at arm's length. TPO noticed that assessee did not furnish the supporting documents in respect of CUP analysis for the purchase of raws material. Further, TPO viewed that back to back invoices could not form a valid CUP as purhcase of raw material from thid party by AEs was not similar to the sale of raw materrial by AE to assessee. According to TPO, valid CUP was where the same transaction, i.e., purchase was compared with another purchase with focal point being assessee. In the instant case, assessee was focal point, hence, TPO did not accept CUP as MAM for purchases. Held: Assessee purchased raw material from its AE and AE supplied raw material to assessee on back to back basis without marking up for any costs or expenses or profit. AE had made purchases from third party vendor which was uncontrolled transaction and supplies made by the AE to assessee were controlled transaction. Price charged by AE to assessee was less or equal to the uncontrolled transaction. This fact was also demonstrated by assessee in respect of purchases made from Saravana Spinning Mills by assessee through AE. TPO had not demonstrated that price charged in controlled transaction was more than the uncontrolled transaction with any proof or evidence. TPO also did not bring any material to show that internal CUP was not acceptable or any restrictions were placed by the Act to consider internal CUP as comparable. It was also undisputed fact that supplier of material was not related party of AE. Hence, there was no reason to reject transfer pricing study of assessee and to accept CUP as most appropriate method in respect of purchases. TPO was directed accordingly.
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