Transfer Pricing Section 92C :Export transactions can't be compared with domestic transactions

Export transactions can't be compared with domestic transactions for TP study

[2015] 57 taxmann.com 193 (Hyderabad - Trib.)

IN THE ITAT HYDERABAD BENCH 'B'

ITW India Ltd.

v.

Deputy Commissioner of Income-tax, Circle 2 (1), Hyderabad

Section 92C of the Income-tax Act, 1961 - Transfer pricing - Computation of arm's length price (Comparables and adjustments/Comparables - Illustrations) - Assessment year 2004-05 - Assessee-company, a manufacturer and trader of packaging material, exported goods to its AEs as well as non-AEs and made sales of its goods in domestic market also - TP adjustment was worked out by TPO by comparing international transactions of assessee-company with its AE with sales of manufactured goods made in domestic segment - It was noted that there were material differences such as quantum of export incentives, level of competition, corresponding freight cost involved etc., which affected substantially profitability of export transactions vis-a-vis domestic transactions - Whether it would not be fair and proper to compare exports with sales in domestic segment, especially when specific instances of export of similar products to overseas non-AEs were available - Held, yes [Para 21] [In favour of assessee/Matter remanded]