CASE LAWS DETAILS
DECIDED BY: ITAT, MUMBAI BENCH `L’, MUMBAI,
IN THE CASE OF: Intervet India Pvt. Ltd. Vs. ACIT, APPEAL NO: ITA No. 2845/Mum/2006, DECIDED ON : March 31, 2010
RELEVANT PARAGRAPH
We heard both Parties. From the submissions made by the assessee the economic and market conditions of Thailand and Vietnam are totally different. The Ld. CIT (A) has held that both the countries are located in Far East Asia and have similar demo graphical constitution. Therefore in the circumstances, where the product in the transaction is similar and location of the concerned parties are somewhat similar, it would not be incorrect to hold that on account of differences in economic condition, volume of transaction the material difference is such that it cannot be overcome by way of adjustment in the price charged in the uncontrolled transaction and the ALP cannot be determined in respect of the transaction with an Associated Enterprise. While we concede that when there is a sale of identical product to an unrelated party, it will form the basis of determining the ALP in respect of sales to an Associated enterprise, but one of the essential prerequisite is that reasonably accurate adjustments are to be made to eliminate material factors affecting price, cost or the profit arising from such transaction. But at least all material factors should be considered in arriving at the adjustments. We find that the TPO and the CIT (A) have assumed similarity of markets and economic conditions and have made adjustments only for the volume discount, credit offered and a small adjustment of credit risk. They have completely ignored the disparate economic and market condition of Thailand and Vietnam and have made no adjustment for the same. Mere geographical contiguity of two countries need not mean similarity in economic or market conditions. How can the sale prices to wholesale agents in two different countries be comparable, when the sale price to the final user in the one country is less than the sale price to the whole sale agent in another country, unless adjustment for the same has been considered. Thus, the adjustments merely for volume off take, credit period and credit risk, though material are not sufficient to make the sale price to AE in Thailand comparable with the sale to unrelated party in Vietnam Scope of adjustments has to be widened and all the submission of the assessee regarding the disparity between the two transactions should be considered and suitable adjustments made for the same.
8. With the above directions the issue is set aside to the file of the Ld. CIT (A) for deciding the matter afresh after giving reasonable opportunity to the Assessee to present their case.
