Rule of consistency led to deletion of transfer pricing additions, while factual claims on losses and deductions were remanded.

Transfer pricing adjustments for intra-group services and sales margin were deleted because identical issues had been consistently accepted in earlier years on the same facts, and the prescribed transfer pricing methods were not properly applied. The rule of consistency was treated as controlling, and the associated enterprise service and sales margin additions were set aside. Foreign exchange loss, leave encashment, and incorrect income computation issues required factual verification, so those matters were remitted to the Assessing Officer for examination and decision in accordance with law after giving the assessee an opportunity to substantiate its claims.

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Issues: (i) whether the transfer pricing adjustment on account of intra-group services was sustainable; (ii) whether the transfer pricing adjustment on account of sales margin was sustainable; (iii) whether the disallowance of foreign exchange loss required fresh examination; and (iv) whether the disallowance relating to leave encashment and the incorrect income computation required verification by the Assessing Officer.

Issue (i): whether the transfer pricing adjustment on account of intra-group services was sustainable.

Analysis: The dispute concerned the arm's length price of intra-group services received from associated enterprises. The reasoning followed the view already taken in the assessee's own earlier years, where similar services were held to have been actually received and to have yielded business benefit. The record also noted that the transfer pricing authorities had treated the services as stewardship activity and had determined nil value without applying the prescribed transfer pricing methods. The Tribunal applied the rule of consistency and followed its earlier coordinate bench decisions on identical facts.

Conclusion: The transfer pricing adjustment on account of intra-group services was deleted, and the issue was decided in favour of the assessee.

Issue (ii): whether the transfer pricing adjustment on account of sales margin was sustainable.

Analysis: The dispute arose from the treatment of the sales margin paid to distributors or associated enterprises. The Dispute Resolution Panel had directed verification of the internal CUP material and computation of arm's length margin in accordance with earlier years. The adjustment was nevertheless sustained by the transfer pricing authority on the ground that the sample-based CUP analysis was incomplete. The Tribunal held that the same approach had been accepted in other assessment years and that a different view could not be taken for the year under appeal on identical facts, applying the rule of consistency.

Conclusion: The sales margin adjustment was deleted, and the issue was decided in favour of the assessee.

Issue (iii): whether the disallowance of foreign exchange loss required fresh examination.

Analysis: The foreign exchange loss claim required examination of the nature of the borrowing, the purpose for which the funds were used, and the correct treatment under the applicable provisions. The Tribunal found that the matter had not been properly examined at the assessment stage and that the record required verification before a final view could be taken on allowability.

Conclusion: The issue was restored to the Assessing Officer for verification, with a direction to decide it in accordance with law after affording an opportunity of hearing.

Issue (iv): whether the disallowance relating to leave encashment and the incorrect income computation required verification by the Assessing Officer.

Analysis: The leave encashment claim required verification of the actual payment and the correctness of the amount disallowed in the return. The computation issue likewise required examination of whether the income adopted in the final assessment order matched the returned and processed figures. In both matters, the Tribunal found that the factual aspects had not been properly verified and that the assessee should be given a reasonable opportunity to substantiate its claim.

Conclusion: Both matters were restored to the Assessing Officer for verification, and the issues were allowed for statistical purposes.

Final Conclusion: The appeals were partly allowed, with the transfer pricing additions deleted and the remaining disputed items remitted for fresh verification by the Assessing Officer.

Ratio Decidendi: Where identical transfer pricing issues have been consistently accepted or deleted in earlier years on the same facts, and the prescribed methods are not properly applied, a different view should not ordinarily be taken; factual allowance claims requiring verification may be remanded to the Assessing Officer for reconsideration.

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