INCOME TAX ACT, 1961

Section 92C

Transfer pricing - Determination of ALP - Re-sale of material imported from AE at a lesser value -

Assessee engaged in business of manufacturing of pharmaceutical products purchased Nicorandil chemical from its AE @ 20,000 per Kg, whereas same chemical was sold in domestic market for lesser value. Accordingly, TPO proposed addition. Assessee sumitted that assessee had purchased chemical from AE in order to export the same and assessee has instructed AE to supply the quality as per the specification of buyers and accordingly AE supplied the chemical following such specification. However, TPO proposed TP justment.Held: Quality of the product for export has to be as per specification of buyers and should go through strict quality check and parameters of the chemical were as per the specification and name of product might be similar what was being sold in the domestic market. However, quality specification might vary according to the specifications required by the buyers.There might be specific requirement of particular quality for export with proper testing. From assessment records, it was not clear as to whether TPO had verified the specifications and TPO had merely verified the name of chemical in documents submitted before him. Also, addition proposed by TPO was negligible compared to the value of exports made by assessee, therefore, addition could not be sustained.