As per sec 92 (1) in international transaction not only the item of income but expenses and interest are also covered

Court :
INCOME TAX APPELLATE TRIBUNAL

Brief :
Ground nos.1 and 2 deal with the deletion of addition of ‘.49,99,680 on account of adjustment made to arm’s length price (ALP) in respect of international transaction with Associated Enterprise (AEs). Briefly stated the facts of these grounds are that the assessee entered into international transactions with its AEs and othe’, as depicted on pages 1 and 2 of the TPO’s order dated 30.10.2008. The assessee followed TNMM for determining arm’s length price. In this way it showed operating profit margin to sales rate at 5.47% and operating profit margin to cost at 5.78%. The Transfer Pricing Officer (TPO), after making certain inclusions in and exclusions from the comparable cases given by the assessee, determined the operating profit margin to cost at the rate of 6.93% for the purposes of bench marking the price charged by the assessee. It has been brought to our notice that after passing of this order, on an application made by the assesse, the TPO rectified his order on 23.02.2009 by proposing adjustment to be made at ‘.49,99,680. When the matter came up before the learned CIT(A), he observed that the exports to the AEs were very less at 3.59% of the total sales. He also noted that the assessee had carried out FAR analysis in its transfer pricing report and the TPO had not pointed out any specific defects in such report. The learned CIT(A) also noticed that in the assessee’s case one of the AEs was in USA where the marginal rate of tax is higher than that of India. Keeping these facto’ into consideration, he ordered for the deletion of addition.

Citation :
The Dy.Commissioner of Income-tax Circle 9(2)Mumbai.(Appellant) Vs. M/s.Indo American Jewellery Limited CTS No.78, A/6, Plot No.3 Shakti Insulated Wires Compound Dattapada Road, Borivali (East)Mumbai – 400 066 PAN: AAACI5033J.(Respondent)