RPM held most appropriate method for benchmarking Rs. 136.63 crore solar goods purchase from associated enterprises

ITAT Delhi held that RPM was the most appropriate method for benchmarking international transactions involving purchase of solar goods worth Rs. 136.63 crores from associated enterprises. The TPO's rejection of RPM in favor of TNMM was overturned as reimbursement expenses and warranty claims totaling Rs. 1.9 crores constituted only 1.5% of total transactions. Since the assessee was merely a reseller without value addition, RPM remained appropriate. The tribunal cited precedents establishing RPM as suitable for resale transactions without value addition.

---

---

Issues:
1. Adjustment of Rs. 6,94,53,296/- on account of international transaction of purchase of solar goods/lights and reimbursement of expenses and warranty cost claim.
2. Selection of comparables to benchmark the transactions of purchase of solar lights and goods.
3. Adjustment in respect of interest rates.

Analysis:

Issue 1: Adjustment of Rs. 6,94,53,296/-
The assessee appealed against the assessment order that adjusted Rs. 6,94,53,296 on account of international transactions involving purchase of solar goods, reimbursement of expenses, and warranty cost claim. The TPO rejected the Resale Price Method (RPM) chosen by the assessee and applied the Transactional Net Margin Method (TNMM) instead. The TPO aggregated the transactions of purchase of solar goods and warranty claims, leading to an adjustment of Rs. 10,61,47,428. The assessee contended that RPM was appropriate as it was a reseller without value addition, supported by case laws. The DRP upheld TNMM but included incomparable companies. The Tribunal held that the assessee's RPM was suitable, as warranty claims were covered by the AEs, and the assessee was a pass-through entity without value addition, leading to the partial allowance of the appeal.

Issue 2: Selection of Comparables
The assessee challenged the selection of comparables for benchmarking the transactions. As the Tribunal found RPM to be the appropriate method, the issue of comparables was left open and not discussed further.

Issue 3: Adjustment in Respect of Interest Rates
The assessee raised a ground regarding adjustment in interest rates but did not press it due to the minimal amount involved. Consequently, this ground was dismissed as not pressed, and the appeal was partly allowed.

In conclusion, the Tribunal upheld the Resale Price Method as the most appropriate for benchmarking the purchase of solar goods, rejected TNMM, left the issue of comparables open, and dismissed the interest rate adjustment ground due to insignificance. The appeal was partially allowed.

---