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Income Tax Appellate Tribunal, “K” BENCH, MUMBAI
Before: HON’BLE SHRI MAHAVIR SINGH, VP & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year [AY] 2008-09 contest final assessment order dated 04/10/2012 passed by Ld. ACIT- 8(1), Mumbai u/s 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961. In the assessment order, the assessee has been saddled with certain Transfer Pricing (TP) Adjustment of Rs.252 Lacs, which is under challenge before us.
2 Assessment Year :2008-09 M/s. Edwards Lifesciences (India) Pvt.Ltd. 2. Although the assessee has raised as many as 7 grounds of appeal along with Form No. 36B, however, Ld. Authorized Representative for Assessee (AR) submitted that only ground nos. 3 & 5 are being pressed in the appeal which read as under: -
3. On the facts, in law and in the circumstances of the case, the Ld. Panel and consequently the AO erred in selecting M/s Advanced Micronic Devices Ltd. - Health Care Segment as a comparable segment, merely on the basis of selection in the previous year, and without taking into consideration that the comparable company is not functionally comparable to the trading activities of the Appellant.
5. Without prejudice to grounds 2 to 4 above, on the facts, in law and in the circumstances of the case, the Ld. Panel and consequently the AO, erred in rejecting the fresh search of comparables undertaken by the Appellant merely on the premise that the reasons of rejections of other comparables was not provided.
The Ld. AR drew attention to the documentary evidences in support of exclusion of a comparable entity namely M/s Advanced Micronic Devices Ltd. The Ld. AR fairly submitted that the fresh comparability analysis carried out by the assessee was not considered by Ld. TPO. In support of argument, the assessee has filed an application under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963 seeking permission to file additional evidences in support of its grounds. These evidences are in the shape of accept-reject matrix of the companies considered during the fresh benchmarking analysis undertaken by the assessee and public information on the operations of M/s Advanced Micronic Devices Ltd. The Ld. CIT-DR submitted that the additional evidences, if admitted, would require appreciation by Ld. TPO. Both the representatives converged on the point that the issue, for aforesaid limited purpose, may be remitted back to the file of Ld. TPO / Ld. AO.
In the above background, we find that the assessee being corporate 3 Assessment Year :2008-09 M/s. Edwards Lifesciences (India) Pvt.Ltd. assessee is stated to be engaged in designing, manufacturing and marketing of a comprehensive line of products and services to treat late- stage cardiovascular diseases. The assessee is primarily a distributor of cardiovascular products assuming normal risk. The assessee entered into certain international transactions with its Associated Enterprises which were subjected to determination of Arm’s Length Price (ALP) thereof u/s 92CA (1) by Ld. Transfer Pricing Officer-1(8), Mumbai. We are concerned with transactions in the distribution segment which comprised-off of import of finished goods, purchase of fixed assets and I.Pass charges, all aggregating to Rs.22.45 Crores. There is no dispute regarding selection of most appropriate method which is Transactional Net Margin Method. The assessee’s Profit Level Indicator was 2.81% which was stated to be within safe harbor of +5% in comparison to comparable entities and therefore, no Transfer Pricing (TP) adjustments were proposed by the assessee in its TP study report. However, Ld. TPO, modifying the comparable matrix, arrived at mean PLI of 8.49% with respect to two comparable entities and proposed TP adjustment of Rs.252 Lacs. The two comparable entities selected in the final analysis were Advanced Micronic Devices Ltd. & Hicks Thermometer India Ltd. 5.1 Before Ld. DRP, the assessee sought exclusion of Advanced Micronic Devices Ltd, inter-alia, on the ground that this entity was engaged in manufacturing of healthcare products and not in trading as contemplated by Ld. TPO. However, the same was rejected by Ld. DRP, who observed that manufacturing revenue of this entity constituted less than 0.2% of turnover in healthcare segment.