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19. One of the things which is clearly discernable from the facts of this case is that so far as the year before us is concerned, which was incidentally first full year of assessee’s operations, the import content of the raw materials was as high at 98.95%. This is materially different from the import content of the raw material in the cases of the com parables selected by the revenue authorities. The import content of raw material in these cases ranged from 26% to 56.83% [Hindustan Motors- 31%; Honda Siel -48.2%; Hyundai Motors – 25.29%; General Motors 56.83% and Maruti Udyog – 26%]. This variation is particularly important since the business model of a car maker having 98.5% import content in raw material normally cannot be the same as of a car maker having import content of 26% to 56.84%. While the latter show substantial indigenous inputs in the raw material, the former is virtually an assembly job of the imported knocked down kits. These business models are so fundamentally different that, in our understanding, no comparisons are possible unless the impact of the import contents are eliminated, or unless it is the case, as was the case before the Tribunal in Sony India Limited (supra], that the
decision to have such a huge import content was a conscious decision taking into consideration all commercial considerations including the obvious benefits of a better quality which is bound to reflect or translate into higher seller product. No doubt, a higher import content of raw material by itself does not warrant, an adjustment in operating margins, as was held in Sony India Limited’s case (supra), but what is to be really seen is whether the high import content was necessitated by the extraordinary circumstances beyond assessee’s control. As was observed by a coordinate bench of this Tribunal in the case of E Gain Communications [supra] “the differences which are likely to materially affect the price, cost charged or paid in, or the profit in the open market are to be taken into consideration with the idea to make reasonable and accurate adjustment to eliminate the differences having material effect”, We do not agree with the Assessing Officer that every time the assessee pays the higher import duty, it must be passed on to the customers or it must be adjusted for in negotiating the purchasing price. All these things could be relevant only when higher import content is a part of the business model which the assessee has consciously chosen but then if it is a business model to import the SKD kits of the cars, assemble it and sell it in the market, that is certainly not the business models of the com parables that the Transfer Pricing Officer has adopted in this case. The adjustments then are required to be made for functional differences The other way of looking at the present situation is to accept that business models of the assessee company and the comparable companies are the same and it is on account of initial stages of business that the unusually high costs are incurred. The adjustments are thus required either way. It is, therefore, permissible in principle to make Adjustments in the costs and profits in fit cases. We also do not agree with the authorities below that the onus is on the assessee to get all such details of the comparable concerns so as to make this comparison possible. The assessee cannot be expected to get the details and particulars which are not in public domain. In such a situation, i.e. when information available in public domain is not sufficient to make these comparisons possible, it is inevitable that some approximations are to be made and reasonable assumptions are to be made. The argument before us was that it was first year of assessee’s operations and complete facilities ensuring a reasonable indigenous raw material content was not in place. The assessee’s claim is that it was in these circumstances that the assessee had to sell the cars with such high import contents, and essentially high costs, while the normal selling price of the car was computed in the light of the costs as would apply when the complete facilities of regular production are in place. None of these arguments were, before any of the authorities below. What was argued before the Assessing Officer was mere fact of higher costs on account of higher import duty but then this argument proceeded on the fallacy that an operation profit margin for higher import duty is permissible merely because the higher costs are incurred for the inputs. That argument has been rejected by a co ordinate bench and we are; in respectful agreement with the views of our esteemed colleagues. This additional argument was not available before the authorities below and it will indeed be unfair for us to adjudicate on this; factual aspect without allowing the Transfer Pricing Officer to examine all the related relevant facts. We, therefore, deem it fit and proper to remit this matter to the file of the Transfer Pricing Officer for fresh adjudication in the light of our above observations and particularly dealing with the contention that the present year being first full year of operations, the assessee was forced to have higher import content in raw material as the manufacturing facilities, and vendor development, was not complete, as also dealing with the contention that the business model in this year of operation was fundamentally different from the business model of the comparable concerns. The Transfer Pricing Officer will also consider whether the import content of the raw material have substantially come; down in the succeeding years and will take into account the conclusions that can be drawn from such a decline or consistency. , as the case may be, of the import content in the raw material. In case the Transfer Pricing Officer comes to the conclusion that adjustments in operating profits margin on account of peculiarities of business model resulting in higher import duties, the Transfer Pricing Officer will consider the manner in which impact of the same can be reasonably neutralized in a practical manner. L One of the suggestions that the assessee has advanced before us is to take into account impact of the non-cenvatable import duty additionally borne by the assessee. The Transfer Pricing Officer has to consider the same, and other option which can be put into service to neutralize the impact of such higher costs. While so deciding the matter afresh, the Transfer Pricing Officer shall also give a due and fair opportunity of hearing to the assessee, shall deal with the contentions of the assessee in a fair and objective manner by way of a speaking order, and in accordance with the law and judicial precedents as may be available at that time. As we remit the matter to the file of the Transfer Pricing Officer, we are alive to the fact that it is difficult to miss, eyen on a cursory glance, that many of the arguments and facts in support of arguments are indeed taken up before us for the first time; and, to that extent, the authorities below never had an opportunity to examine these aspects of the matter. Take, for example, the submissions regarding capacity re utilization. It was never taken up before the Transfer Pricing . Officer in the first place. Similarly, the issues regarding product cycles of these product cycles on operating profit margins was never before the Assessing Officer. The relevance of multiple year data hinges on acceptance of this theory about: relevance of product cycle. The Crisil report which has been repeatedly referred before us was apparently not available to the Transfer Pricing Officer. In these circumstances and bearing in mind the fact the year before us was only second year of implementation of transfer pricing regime and it was a new area of taxation laws in which law had not . developed, we think that it will meet the ends of Justice that the assessee has liberty to raise all these arguments before the Transfer Pricing Officer so that the Transfer pricing Officer can examine all the relevant contentions and decide the same by way of a speaking order in accordance with the law. As we are remitting these issues to the file of the Transfer Pricing Officer, and as these issues are somewhat academic at this stage which will be relevant only when the assessee’s plea regarding adjustment on account of higher import duties being warranted by peculiarities of operations in this year, we refrain from making any observations on the merits of the case. With the above observations, we hereby remit the matter to the file of the Transfer Pricing Officer so far as question of determination of Arms Length Price under the TNMM method is concerned.