KEHIN INDIA MANUFACTURING PVT. LTD.,GURGAON vs. ADDL. CIT, NEW DELHI

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ITA 2851/DEL/2017Status: DisposedITAT Delhi15 January 2020AY 2013-145 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal, following its co-ordinate bench's decisions for earlier years, found merit in the assessee's contentions. It directed the TPO/AO to reconsider TNMM as the MAM and conduct a fresh analysis of comparables for benchmarking the international transaction.

What were the facts?

The assessee's appeal challenges the TPO and DRP's decision to reject the Transactional Net Margin Method (TNMM) as the Most Appropriate Method (MAM) and instead select the Resale Price Method (RPM). The assessee argued that identical issues were decided in its favor in previous assessment years.

What were the issues?

The primary issue was the selection of the Most Appropriate Method (MAM) for benchmarking international transactions, specifically whether TNMM should be preferred over RPM.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI ‘I-1’ BENCH,

Before: SHRI N.K. BILLAIYA, & SHRI SUDHANSHU SRIVASTAVA

For Appellant: Ms. Pallavi Dinodia, Adv
Hearing: 14.01.2020Pronounced: 15.01.2020

PER N.K. BILLAIYA, ACCOUNTANT MEMBER,

1.

This appeal by the assessee is preferred against the order dated 09.03.2017 framed u/s 143(3) r.w.s 144C of the Income-tax Act, 1961 [hereinafter referred to as 'The Act'] pertaining to Assessment Year 2013-14.

2.

The sum and substance of the grievance of the assessee is that the TPO as well as the DRP erred in not accepting the Transactional Net Margin Method [TNMM] as Most Appropriate Method [MAM] and selected Resale Price Method [RPM] as MAM.

3.

At the very outset, ld. counsel for the assessee stated that identical issues were considered by the Tribunal in assessee’s own case in Assessment Years 2010-11, 2011-12 and 2012-13. The ld counsel furnished copies of the orders of the Tribunal for Assessment Years 2010-11 and 2012-13. It is the say of the ld. counsel for the assessee that the Tribunal has decided the impugned issues in favour of the assessee and against the Revenue.

4.

Per contra, the ld. DR could not bring any distinguishing decision in favour of the Revenue but heavily relied upon the findings of the TPO.

5.

We have given thoughtful consideration to the orders of the authorities below. We find force in the contentions of the ld. counsel for the assessee. The applicability of MAM has been considered by the co-ordinate bench in Assessment Year 2010-11 in and in Assessment Year 2012-13 in ITA No. 6085/DEL/2016. The relevant findings of the co-ordinate bench read as under:

“10. Now coming to the applicability of TNMM as MAM, we find that in all the earlier years TNMM has been finally held to be most appropriate method on the facts of the assessee’s case and since there is no change in material facts or FAR, then TNMM should be adopted as the most appropriate method to benchmark the international transaction of the assessee with the AE in the trading segment. Since this method has not been analysed by the TPO and the same comparable selected by the assessee has been adopted by the TPO for the purpose of RPM, therefore, we are of the opinion that the matter should be remanded back to the file of the TPO and AO, firstly, to consider TNMM as the MAM constituting the past history of the assessee; and secondly, to carry our fresh search analysis of the comparables and then benchmark the assessee’s transaction in the trading segment. The TPO shall give effective opportunity to the assessee to substantiate its case and after analysing the comparables, ALP of the Trading Segment should be determined. All the other grounds raised by the assessee before us relating to transfer price adjustment shall be open before the TPO, except for the directions 12 given herein above. In the result, ground pertaining to transfer pricing adjustment is treated as partly allowed for statistical purposes.

6.

Respectfully following the findings of the co-ordinate bench [supra], we set aside the matter to the file of the TPO/Assessing Officer. The TPO/Assessing Officer is directed to decide the issue afresh as per directions of the co- ordinate bench. Accordingly, ground pertaining to TP adjustment is treated as partly allowed for statistical purposes.

7.

In the result, the appeal of the assessee is treated as partly allowed for statistical purposes.

The order is pronounced in the open court on 15.01.2020.

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