2020 (8) TMI 917 - AT - Income Tax

Tribunal upholds TNMM for ALP determination, rejects Revenue's appeal.

The Tribunal dismissed the Revenue's appeals for assessment years 2011-12 and 2012-13, upholding the use of the Transactional Net Margin Method (TNMM) for ... TP Adjustment - selection of MAM - HELD THAT:- As decided in own case [2019 (12) TMI 1630 - PUNJAB AND HARYANA HIGH COURT] conclusion of the ITAT could not be faulted as the same was inconsonance with the provisions of the Act and the Rules. The contention of the Counsel for the revenue cannot be accepted as the Tribunal while upholding the TNMM Method has observed that the other methods prescribed under the Act namely the CUP or Cost Plus Method being not applicable in the facts and circumstances of the case, the Respondent Assessee could only resort to TNMM as the most appropriate method to show that its profit margin from international transactions was at arm’s length. As mentioned elsewhere, the facts of the years under consideration are identical to the facts considered by the co-ordinate bench and Hon'ble High Court in earlier A.Ys. Therefore, respectfully following the decision of the Hon'ble Punjab and Haryana High Court [2019 (12) TMI 1630 - PUNJAB AND HARYANA HIGH COURT] we decline to interfere with the findings of the ld. CIT(A). Accordingly, the grounds raised by the Revenue in both the A.Ys stand dismissed. Issues involved:Transfer pricing adjustments based on Arm's Length Price of international transactions for assessment years 2011-12 and 2012-13.Detailed Analysis:Issue 1: Transfer Pricing AdjustmentsThe Revenue appealed against the CIT(A)'s order deleting the addition of Rs.1,20,46,033 made by the Assessing Officer on account of difference in Arm's Length Price of International Transactions. The TPO recommended the addition based on the selection of TNMM as the most appropriate method for determining ALP. However, the TPO made adjustments for two specific items using the CUP method. The CIT(A) deleted the additions, citing previous Tribunal decisions in the appellant's favor for similar issues. The CIT(A) noted that the TPO failed to provide comparables before applying the CUP method and that the appellant had shown no substantial benefit directly attributable to the transactions. The CIT(A) relied on previous Tribunal and High Court decisions in the appellant's favor for similar assessment years. The Revenue contended that the TNMM was not the most appropriate method and that the ITAT erred in rejecting the CUP method. However, the Tribunal upheld the CIT(A)'s decision, stating that the TNMM was appropriate due to the lack of comparables and the nature of the activities involved. The Tribunal also noted that the expenses were reimbursement of salaries without markup, leading to the dismissal of the Revenue's appeals.Conclusion:The Tribunal dismissed the Revenue's appeals for both assessment years based on the consistent findings of the CIT(A) and previous Tribunal and High Court decisions in the appellant's favor. The Tribunal upheld the use of TNMM as the most appropriate method for determining the Arm's Length Price of international transactions, considering the lack of comparables and the nature of the transactions involved.