| The Tax Publishers2020 TaxPub(DT) 1264 (Pune-Trib) INCOME TAX ACT, 1961
Section 92C
Assessee made exclusive sale of spare parts to the Dealers to the tune of Rs. 50.00 crore out of total sale of spares of Rs. 71.56 crore. Thus about 70% of total sales of spare parts of assessee had no connection whatsoever with service as same had been made directly to dealers. In addition, assessee had also made exclusive sale of spare parts to Direct customers, whose figure was stated to be not available. This analysis left no room for doubt that sale of service parts was, by and large, independent of service and therefore, TPO rightly segregated revenue under ESAS business segment into three segments, namely, Indenting, Service and Trading and accordingly, suggested TP adjustment.
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Transfer pricing - Determination of ALP - Aggregation v. segregation- Transactions not being closely linked -
Assessee, inter alia, reported international transactions of `Import of engines for trading' `Import of spares and components for trading'; `Sale of spares'; `Receipt of commission on sales'; `Service income; `Payment for training received'; `Service income - Warranty and after-sales services'; and `Payment of IT maintenance charges'. TPO noticed that assessee aggregated the eight transactions under a common ESAS segment for benchmarking, which he did not approve.He segregated revenue under ESAS business segment into three segments, namely, Indenting, Service and Trading and accordingly, suggested TP adjustment. Held:Two separate international transactions can be termed as closely linked and capable of aggregation only when they are either valued together or valued separately but so inextricably linked with each other that one cannot exist without the other, which was, unfortunately, not in assessee's case. The situation would have been different warranting aggregation if entire sale of spare parts by assessee had been dependent on its own servicing so as to make Trading and Service as one inter-woven transaction.Assessee made exclusive sale of spare parts to the Dealers to the tune of Rs. 50.00 crore out of total sale of spares of Rs. 71.56 crore. Thus about 70% of total sales of spare parts of assessee had no connection whatsoever with service as same had been made directly to dealers. In addition, assessee had also made exclusive sale of spare parts to Direct customers, whose figure was stated to be not available. This analysis left no room for doubt that sale of service parts was, by and large, independent of service and therefore, TPO rightly segregated revenue under ESAS business segment into three segments, namely, Indenting, Service and Trading and accordingly, suggested TP adjustment.
REFERRED :
FAVOUR : Against the assesse
A.Y. :
INCOME TAX ACT, 1961
Section 92C
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