COMMISSIONER OF INCOME TAX Vs. ADANI WILMAR LTD.

JUDGEMENT

(1.) The Revenue is in appeal against the judgment of the Income-tax Appellate Tribunal (hereinafter referred to as "the Tribunal") dated June 21, 2013, raising the following questions for our consideration:

(2.) Questions B to D pertain to computation of the arm's length price. The Transfer Pricing Officer (hereinafter referred to as "the TPO") adopted comparable uncontrolled prices (CUP) method. In the process, the assessee had presented two sets of prices claiming them to be comparable. One set of transactions relied on by the assessee was supplied by Malaysian Palm Oil Board (hereinafter referred to as "the MPOB"). Simultaneously, the assessee also relied on the quotations by one Oil World, an organisation based in Germany. The assessee adopted the average of two sets of prices and claimed that the price variance between the assessee's transaction and the average of two sets of prices did not exceed 5 per cent and, therefore, no additions were necessary. The Transfer Pricing Officer, however, took into account only the rates mentioned by the MPOB and totally discarded the rates quoted by the German organisation. He, therefore, rejected the arithmetic mean of two sets of the prices in order to determine the arm's length price. This was on the basis of mainly two objections of his. One was that the MPOB was a Government nodal agency for palm oil industry in Malaysia, whereas the quotations of Oil World did not have any statutory authority. The second objection was that Oil World was an independent organisation registered in Germany and had nothing to do with the oil prices prevailing in Malaysia. He relied on rule 10D(3)(a) of the Income-tax Rules (hereinafter referred to as "the Rules"), to place heavy reliance on the price list of the MPOB.

(3.) The assessee carried the matter in appeal. The Commissioner of Income-tax (Appeals) discarded both the objections of the Transfer Pricing Officer. Referring to section 92C of the Income-tax Act, 1961 (hereinafter referred to as "the Act") and rule 10D(3) of the Rules, he found that the quotations of the Oil World could not have been discarded. He observed as under: