Tribunal limits transfer pricing adjustment to Rs. 4.47M, overturning higher Centre's adjustment. Assessee's appeal allowed.

The Tribunal directed the National faceless assessment Centre to restrict the transfer pricing adjustment to Rs. 4,470,673/- based on the assessee's methodology, as proposed in the remand report, overturning the higher adjustment of Rs. 21,900,415/- made by the Centre. The appeal of the assessee was allowed on this ground, while other supportive grounds were not adjudicated upon and dismissed.

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Issues:
Transfer pricing adjustment made by National faceless assessment Centre.

Detailed Analysis:
1. The appeal was filed by the assessee against the Assessment order passed by the National faceless assessment Centre under various sections of The Income Tax Act, primarily objecting to the transfer pricing adjustment made by the Centre. The assessee contended that the adjustment was higher than directed by the Dispute Resolution Panel.

2. The assessee, a manufacturer of elastic narrow fabrics in India, had entered into international transactions and was selected for scrutiny. The transfer pricing officer found discrepancies in the royalty income received from associated enterprises in Vietnam. The officer benchmarked the transaction using the Transactional Net Margin Method, resulting in a substantial adjustment.

3. Despite objections raised by the assessee and additional submissions made, the transfer pricing adjustment remained a point of contention. The Dispute Resolution Panel directed the transfer pricing officer to submit a remand report, which ultimately led to a reduced proposed adjustment of Rs. 4,470,673/- as opposed to the initial adjustment of Rs. 21,900,415/-.

4. The National faceless assessment Centre, however, repeated the higher adjustment of Rs. 21,900,415/- in its assessment order, leading to further dispute. The authorized representative argued that the Centre should have accepted the reduced adjustment proposed in the remand report.

5. After careful consideration, it was observed that the transfer pricing approach adopted by the assessee, as detailed in the remand report, was found to be acceptable by the transfer pricing officer. The officer suggested restricting the adjustment to Rs. 4,470,673/- based on the assessee's methodology. However, the Centre repeated the higher adjustment without clear justification.

6. Consequently, the Tribunal directed the Centre to restrict the addition on account of arm's-length price of the international transaction to Rs. 4,470,673/-, as proposed in the remand report. The appeal of the assessee was allowed on this ground, with other supportive grounds not adjudicated upon and dismissed.

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