Resale Price Method upheld for 2017-18 assessment, assessee's appeal partly allowed

The Tribunal held that the Resale Price Method (RPM) was the most appropriate method for the Assessment Year 2017-18 due to the absence of management support services and the consistent functional profile for the purchase of trading goods. The Tribunal allowed the assessee's appeal on this ground, remitting other issues to the Assessing Officer/TPO for further review. The appeal was partly allowed for statistical purposes.

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Issues Involved:
1. Rejection of Resale Price Method (RPM) as the most appropriate method (MAM) for benchmarking international transactions.
2. Consistency in applying the Transactional Net Margin Method (TNMM) as MAM in previous assessment years.
3. Aggregation of transactions related to management support services with the purchase of trading goods.
4. Application of RPM as MAM for the assessment year under consideration.

Detailed Analysis:

Issue 1: Rejection of Resale Price Method (RPM) as the Most Appropriate Method (MAM)
The assessee, a Private Limited Company engaged in trading sanitary wares, filed its return for the Assessment Year 2017-18. The Transfer Pricing Officer (TPO) rejected RPM as the MAM for benchmarking international transactions and instead applied TNMM, resulting in an adjustment of Rs. 7,51,50,945/-. The Dispute Resolution Panel (DRP) upheld the TPO's findings, leading to the assessee's appeal. The assessee argued that RPM was consistently used in previous years and was appropriate given the unchanged functional profile.

Issue 2: Consistency in Applying TNMM as MAM in Previous Assessment Years
The TPO noted that the assessee had used TNMM in Assessment Years 2012-13, 2013-14, and 2016-17, and there was no change in the functional profile. The principle of consistency was cited to justify the application of TNMM for the Assessment Year 2017-18. The DRP also recorded that TNMM was the most appropriate method due to the unchanged functional profile and the aggregation of transactions involving management support services in previous years.

Issue 3: Aggregation of Transactions Related to Management Support Services with Purchase of Trading Goods
The assessee contended that it had adopted TNMM in earlier years due to aggregation of transactions involving management support services, which were absent in the Assessment Year 2017-18. The assessee argued that RPM should be applied for the purchase of trading goods as there was no change in the functional profile. The Tribunal referred to the TP study for Assessment Year 2016-17, which indicated that RPM was appropriate but TNMM was used due to transaction aggregation.

Issue 4: Application of RPM as MAM for the Assessment Year Under Consideration
The Tribunal considered the assessee's argument and previous Tribunal decisions, noting that there is no bar on changing the MAM if warranted by the facts. The Tribunal emphasized that each assessment year is independent and the facts for Assessment Year 2017-18 justified the use of RPM as the MAM. The Tribunal concluded that since there were no management support services in the year under consideration, RPM was the appropriate method for benchmarking the international transactions.

Conclusion:
The Tribunal held that RPM is the most appropriate method for the Assessment Year 2017-18, given the absence of management support services and the unchanged functional profile for the purchase of trading goods. The Tribunal allowed the assessee's appeal on this ground and remitted other grounds to the Assessing Officer/TPO for fresh consideration, providing an opportunity for the assessee to present its case. The appeal was partly allowed for statistical purposes.

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