2017 (5) TMI 1636 - AT - Income Tax

Tribunal rules in favor of assessee in Transfer Pricing dispute, upholding TNMM method over CUP.

The Tribunal upheld the Dispute Resolution Panel's decision, ruling in favor of the assessee in a Transfer Pricing adjustment dispute. The Tribunal found ... TPA - ALP determination - selection of MAM - DRP rejecting the CUP method adopted by TPO - Appropriateness of the TNMM method - Held that:- As decided in assessee;s own case in earlier years [2014 (5) TMI 1066 - ITAT PUNE] we find in principle the facts are the same. In those years too, Transfer Pricing adjustments were made to the transactions with Associated Enterprises with reference to the Export of goods and Import of the raw materials. Appropriateness of the TNMM method was also the issue in those years. Tribunal decided the issue in favour of the assessee and dismissed the appeal of the revenue on those issues. After hearing both the sides and perusing the contents of the DRP, we are of the opinion that the order passed by the DRP with reference to the most appropriate accounting method for TP study, is fair and reasonable and same does not call for any interference. Accordingly, the ground raised by the Revenue is dismissed. Issues:Transfer Pricing Adjustment - CUP method vs. TNMM method appropriateness.Analysis:The appeal pertains to a Transfer Pricing adjustment for the assessment year 2010-11. The assessee, an Indian Subsidiary of a corporation, filed its return declaring income. The Transfer Pricing Officer (TPO) observed discrepancies in pricing for export and import transactions with Associated Enterprises compared to third parties. The TPO applied the Comparable Uncontrolled Price (CUP) method and made adjustments to the transactions. Subsequently, the Assessing Officer issued a draft order incorporating these adjustments. The assessee objected before the Dispute Resolution Panel (DRP), citing previous Tribunal rulings and contesting the appropriateness of the CUP method. The DRP granted relief to the assessee based on the Tribunal's earlier decisions in similar cases. The Revenue, aggrieved by the DRP's decision, appealed the matter.The Revenue contended that the CUP method should have been adopted instead of the Transactional Net Margin Method (TNMM) chosen by the assessee. The Revenue argued that direct comparability was available, making the CUP method more appropriate. However, the assessee relied on the DRP's order and Tribunal rulings to support its position. The DRP's order highlighted that the Tribunal had previously ruled in favor of the assessee in similar cases, rejecting the TPO's adjustments. The DRP, based on the Tribunal's past decisions, directed the Assessing Officer not to make any adjustments to the transactions in question.Upon review, the Tribunal found similarities in the issues raised in the current and previous assessment years. The Tribunal noted that in earlier years, Transfer Pricing adjustments were made, and the appropriateness of the TNMM method was contested, with the Tribunal ruling in favor of the assessee. After considering the arguments and the DRP's order, the Tribunal concluded that the DRP's decision on the accounting method for the Transfer Pricing study was fair and reasonable. Consequently, the Tribunal dismissed the Revenue's appeal, upholding the DRP's decision and ruling in favor of the assessee.In conclusion, the Tribunal upheld the DRP's decision, emphasizing consistency with past Tribunal rulings and the fairness of the chosen Transfer Pricing method. The appeal of the Revenue was dismissed, affirming the direction not to make adjustments to the transactions, based on the principles established in previous Tribunal decisions.