Appeal upheld for ALP determination in AY 2009-2010. Directs to consider commission margins.

The Revenue appealed against the ITAT order for AY 2009-2010 challenging the ALP determination. The ITAT found the TPO's approach faulty for not considering commission margins in each segment. The Court directed the AO to determine commission rates in compliance with Rule 10(B) of the Income Tax Rules. The appeal was disposed of with directions to consider commission margins in each segment, upholding the ITAT's decision on determining commission rates.

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Issues:
1. Appeal by Revenue against ITAT order for AY 2009-2010 regarding arms length price (ALP) determination.
2. Dispute over ALP determination for commission and trading segments.
3. Application of TNMM method and comparison of commission percentages from AE and non-AE transactions.
4. Consideration of Berry ratio and TNMM method under Indian law.
5. Whether TPO/AO could refuse to consider comparable profits from non-AE transactions in both segments.

Analysis:
1. The Revenue appealed against the ITAT order for AY 2009-2010, challenging the ALP determination. The dispute arose from the adjustment of &8377; 88,40,13,476/- directed by the TPO, which was accepted by the AO. The ITAT discussed the nature of transactions and found the TPO's approach faulty in not considering the margin of commission in each segment while determining the ALP.

2. The assessee, engaged in import and export activities, had two business segments: commission business and trading activities. The TPO rejected the TNMM method suggested by the assessee and made adjustments based on profit margins from non-AE transactions. The ITAT directed the AO to consider commission margins in each segment for ALP determination, emphasizing the functional differences between trading and commission businesses.

3. The ITAT compared commission percentages from AE and non-AE transactions, highlighting the need to benchmark commission rates based on non-AE transactions for indenting business segments. The Tribunal's decision was based on precedents from earlier years and rejected the application of TNMM method suggested by the assessee.

4. The Court noted the contention regarding the Berry ratio and TNMM method under Indian law, emphasizing the ongoing debate on the application of TNMM method. The Court directed the AO to determine commission rates in each segment in compliance with Rule 10(B) of the Income Tax Rules.

5. The Court clarified that the issue for AY 2009-2010 was narrow, focusing on whether the TPO/AO could refuse to consider comparable profits from non-AE transactions in both segments for ALP determination. The ITAT's direction to consider commission margins in each segment was upheld, and the AO was instructed to follow Rule 10(B) principles while carrying out the exercise. The appeal was disposed of with these directions, maintaining the Tribunal's decision on determining commission rates in each segment.

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