Tribunal allows appeal delay, upholds internal TNMM over external TNMM for transfer pricing analysis.

The Tribunal condoned the delay in filing the appeal due to valid reasons and admitted it for adjudication. Regarding the transfer pricing analysis, the Tribunal upheld the use of internal Transactional Net Margin Method (TNMM) over external TNMM, directing the Assessing Officer to re-examine the issue under internal TNMM. The appeal was partially allowed for statistical purposes, emphasizing the need for consistent application of internal TNMM in benchmarking transactions with Associated Enterprises.

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Issues involved:
Delay in filing the appeal, Applicability of internal transactional net margin method (TNMM) in transfer pricing analysis.

Delay in filing the appeal:
The appeal by the assessee against the final assessment order was delayed by 121 days, for which the assessee sought condonation of delay citing reasons related to hospitalization and personal events. The Tribunal, after examining the cause of delay, found it reasonable and decided to condone the delay, admitting the appeal for adjudication on merits.

Applicability of internal TNMM in transfer pricing analysis:
The primary issue raised by the assessee pertained to the applicability of internal TNMM as opposed to external TNMM selected by the Transfer Pricing Officer (TPO) for determining the arm's length price (ALP). The Tribunal noted that the assessee, a resident company engaged in importing raw materials from Associated Enterprises (AE), applied internal TNMM to determine ALP. The TPO rejected the internal TNMM and applied external TNMM, proposing an adjustment to the income of the assessee. However, the Tribunal, based on its previous decisions in the assessee's own case for assessment years 2011-12 and 2012-13, held that internal TNMM was the most appropriate method for benchmarking transactions with AE. Consequently, the Tribunal directed the issue to be re-examined by the Assessing Officer under internal TNMM, providing the assessee with a fair opportunity to justify its benchmarking.

Conclusion:
The Tribunal partially allowed the appeal for statistical purposes, as the decision on the applicability of internal TNMM rendered other grounds raised by the assessee academic. The Tribunal emphasized the need for the Assessing Officer to re-evaluate the benchmarking under internal TNMM, in line with the consistent view taken in the assessee's previous cases.

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