Appeals dismissed as inter partes settlement and consistent TNMM application barred reopening after comparable excluded and no upward adjustments

HC refused to entertain the appeals because the assessment for the relevant year was settled inter partes, with the disputed comparable excluded from the comparable set and no upward adjustments made by the department. The ITAT had found significant differences in product segments, marketing and discount treatment and held TNMM to be the appropriate method. The same approach was accepted and applied in subsequent years, and, invoking consistency, the court found no justification to reopen the matter.

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Issues:
The issues involved in this judgment are:
1. Whether the Income Tax Appellate Tribunal erred in excluding Modicare Limited as a comparable under the Resale Price Method despite reliable data being available and its comparability analysis being established by the Transfer Pricing OfficerRs.
2. Whether the ITAT erred in restricting the TPO to the comparables set by the assessee in the Transfer Pricing analysis, thus restraining the TPO from conducting an independent comparability analysis as required by the Income Tax ActRs.

Issue 1:
The respondent, a subsidiary engaged in selling skin care and cosmetic products, had international transactions with associated enterprises referred to the TPO for determination of the arm's length price for assessment years 2009-10 to 2012-13. The TPO rejected the comparables selected by the respondent and included Modicare as a comparable, leading to upward income adjustments. The ITAT remanded the matter back to the TPO to enhance Modicare's comparability with the respondent.

Issue 2:
The High Court found that dissimilarities in products sold and turnover proportions impact profitability, emphasizing the importance of segmental data missing for Modicare. The differential marketing strategy between the entities was also considered, with the Court directing the ITAT to re-examine the appropriateness of including Modicare and the functional differences in marketing strategy. The ITAT ultimately held that Modicare cannot be considered a comparable entity under the RPM method and recommended the TNMM as the most appropriate method for benchmarking.

Conclusion:
The High Court dismissed the appeals as the matter had been resolved inter partes for subsequent years, with Modicare excluded from comparables to determine the arm's length price. The principle of consistency was cited as the reason for not entertaining the appeals, leading to their dismissal.

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