Tribunal Upholds CIT(A) Decision on Transfer Pricing, Dismisses Revenue's Appeal

The Tribunal upheld the decision of the ld. CIT(A) in accepting the internal TNMM and dismissed the revenue's appeal as infructuous. The Tribunal found no error in the directions given by the ld. CIT(A) regarding the determination of ALP of international transactions with AE based on net margins earned. Additionally, despite the absence of segment reporting in the taxpayer's financials and the lack of appearance by the assessee during hearings, the Tribunal disposed of the appeal on its merits, upholding the decision of the ld. CIT(A) and deeming the revenue's appeal infructuous.

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Issues:
1. Whether the order of ld. CIT(A) is perverse in accepting the internal TNMM of the assesseeRs.
2. Whether the order of ld. CIT(A) is perverse in ignoring the fact of no segment reporting in the financials of the taxpayerRs.

Analysis:

1. The appeal was filed by the revenue against the order of ld. CIT(A)-44, New Delhi. The revenue raised concerns regarding the acceptance of the internal TNMM by the assessee, despite the company changing its stand and offering adjustments under external TNMM during TP proceedings. The AO had made an addition on account of Transfer Pricing adjustment, leading to a contraption of returned loss. The assessee provided export segment results showing operating profit in export sales, with a higher margin to AE segment compared to non-AE segment. The Ld. CIT(A) directed the TPO/AO to determine the ALP of international transactions with AE based on net margins earned. The TPO was instructed to calculate costs based on a CA's certified segment accounts, which was unobjected in the remand report. The Tribunal found no error in the directions given by the ld. CIT(A) and dismissed the revenue's appeal as infructuous.

2. The second issue raised was regarding the absence of segment reporting in the taxpayer's financials. The Tribunal noted that no such segmental reporting was furnished during the original TP proceedings. Despite the lack of appearance by the assessee during hearings and failure to clarify the amount in dispute, the Tribunal decided to dispose of the appeal on its merits. The Tribunal upheld the decision of the ld. CIT(A) in accepting the internal TNMM and rejected the revenue's appeal, deeming it infructuous. The judgment was pronounced in open court on 10/01/2022.

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