Appeal dismissed: TPO's CUP benchmarking rejected; prior CPM accepted, TP adjustments overturned under Section 92C; no legal question

HC dismissed the appeal and upheld the ITAT and CIT(A) findings that the TPO's application of the CUP method for benchmarking the international transactions was unwarranted. Because the comparables used by the TPO were negligible and the CPM method previously applied by the taxpayer had been accepted by the TPO in later years and in assessments on record, the TP adjustments based on CUP and the alternative internal rate of return were rejected. No substantial question of law arises.

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Issues:
The judgment involves the determination of the Arm's Length Price (ALP) of international transactions, specifically focusing on export sales and commission receipts, and the methodology to be adopted for benchmarking these transactions.

Export Sales Issue:
The respondent's export sales of Cold Rolled Electrical Steel to its Associated Enterprise (AE) were benchmarked using the Cost Plus Method (CPM). However, the Transfer Pricing Officer (TPO) applied the Comparable Uncontrolled Price Method (CUP) and made adjustments. The Commissioner of Income Tax (Appeals) observed that the TPO's rejection of the CPM method lacked cogent reasons and the transactions considered under CUP were not in line with the Income Tax Rules. The CIT(A) deleted the addition, noting that the TPO's methodology was inconsistent with previous years where the CPM method was accepted.

Commission Receipt Issue:
Regarding the commission received from the AE, the respondent applied the CUP method for benchmarking, which was consistent across multiple years. The TPO, however, used the Internal Rate of Return (IRR) method for the relevant assessment year. The CIT(A) rejected the TPO's methodology, citing judicial decisions and consistency in applying the CUP method in subsequent years. The Income Tax Appellate Tribunal (ITAT) upheld the CIT(A)'s decision, emphasizing the respondent's consistent approach.

Judgment Summary:
The High Court upheld the ITAT's decision to delete the adjustments made by the TPO on the ALP of international transactions, including export sales and commission receipts. The Court found no merit in the TPO's application of the CUP method, considering the respondent's historical use of the CPM method and the consistency in applying the CUP method for commission receipts. The Court dismissed the appeal, concluding that no substantial questions of law arose for consideration.

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