TaxTMI 
TaxTMI 
2015 (10) TMI 1067
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.... :- "01. The learned Commissioner of Income-tax (Appeals) erred in holding that the assessee was a service provider and was thus entitled to commission whereas the FAR analysis showed that the assessee was a full fledged distributor. 02. The learned Commissioner of Income-tax (Appeals) erred in not appreciating the fact that the appellant assessee was not an ordinary commission agent but a distributor of the Associated Enterprises undertaking the task of sales representative, marketing, clearing & forwarding, assembling and installation & commissioning thereby assuming all the normal risk of the full fledged distributor including the credit risk. 03. The learned Commiss....
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....order to benchmark its international transactions with the associated enterprises, assessee selected the Transactional Net Margin (TNM) method as the most appropriate method in its Transfer Pricing Study. The Profit Level Indicator (i.e. PLI) was computed with reference to Operating profits /Total costs and since the PLI of the assessee was 30.32% and the average of PLIs of the comparable cases selected was 2.32%, international transactions of the assessee with its associated enterprises on account of Provision of marketing and installation services was considered at an arm's length price. 5. The Transfer Pricing Officer (TPO) disagreed with the assessee broadly on two issues. Firstly, as per the TPO, the nature of assessee's trans....
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.... assessee and the TPO was the manner of computing the PLI. The TPO changed the PLI from Operating profits/ Total costs taken by the assessee to Operating profit/ Sales. The TPO chose 5 comparables out of 8 selected by the assessee in its Transfer Pricing Study and the PLI based on the formula of Operating profit/ Sales of the 5 comparables was calculated at 6.44% and accordingly, the arm's length price of the international transactions was arrived at by making an upward adjustment of Rs. 11,28,35,670/-. The addition made by the Assessing Officer based on such adjustment worked out by the TPO was carried in appeal before the CIT(A), who has since deleted the same following his own order for the assessment year 2004-05 in the assessee'....
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....eting support services provider assessee was bearing the credit risk only to the extent of commission income accruing on the respective sales and in so far as the credit risk of the entire sale price recoverable from the Indian customer was concerned, it was borne by the associated enterprises. For all the above reasons, it was canvassed by the assessee that it was merely a marketing support service provider and not a distributor. 8. The action of the TPO in changing the PLI from Operating profit/ Total cost to Operating Profit/ Sales was also challenged by pointing out that tested transaction pertained to commission income received from the associated enterprises, and therefore the PLI cannot be based on income which itself was the subjec....