TaxTMI 
TaxTMI 
2017 (11) TMI 1655
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....allowed the assessee's appeal. The Revenue, in this appeal, urged three questions. By order dated 04.08.2017, this Court declined to frame questions on the issue of disallowance under Section 14A, as well as the issue of advertisement expenditures. The Court issued notice only on the issue of transfer pricing. 2. The facts necessary are that the assessee, is a private company engaged in the business of sale of airtime, renting out of handsets and SIM cards. It filed its return of income on 26.09.2009 declaring loss of Rs. l5,67,73,021/-. Its case was selected for scrutiny and notice under section 143(2)/142(1) was issued to it. The assessing officer (AO) noticed that during the relevant financial year the assessee had undertaken intern....
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....d disallowance under section 14A of the Act. Aggrieved, the assessee carried the matter in appeal to the ITAT. 4. The ITAT, by order dated 17.10.2016 allowed the appeal of the assessee and deleted all the additions/disallowances made in the assessment order. 5. The Revenue's grievance is that the learned ITAT erred in adopting the Resale Price Method (RPM) as the Most Appropriate Method under Section 92C of the Act. It is urged by the revenue that the assessee in its transfer pricing report furnished before the TPO had adopted the Transactional Net Margin Method (TNMM). Given that the assessee considered TNMM as the Most Appropriate Method for determining the arms' length price for its transactions, and the TPO, as well as AO and ....
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....there was no distinction between airtime and SIM cards, as no value could be added to the airtime resold by the assessee. Since the SIM cards are resold without making any value addition, the ITAT concluded that the assessee carried out purely trading business, and hence the RPM was the Most Appropriate Method for calculating arms' length price. 8. This Court finds that once the ITAT, on considering the relevant facts as well as the order of the TPO, had concluded that the business of the assessee was merely that of a pure trader, and there was no value addition made before re-selling the particular products (i.e. the SIM cards), its consequent finding that RPM is the Most Appropriate Method, is irreproachable. In Nokia India (P) Ltd. ....
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....ies the price at which the product purchased from the A.E. is resold to a unrelated party. Such price is reduced by normal gross profit margin i.e., the gross profit margin accruing in a comparable controlled transaction on resale of same or similar property or services. The RPM is mostly applied in a situation in which the reseller purchases tangible property or obtain services from an A.E. and reseller does not physically alter the tangible goods and services or use any intangible assets to add substantial value to the property or services i.e., resale is made without any value addition having been made." 11. This view has also been affirmed by the Bombay High Court in its judgment dated 07.11.2014 in CIT v. L'Oreal India (P.) Ltd.[2....
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....he TNMM as the Most Appropriate Method to benchmark the international transactions it had undertaken, and only adopted the RPM as a secondary method to justify its losses at the net level. The ITAT relied upon the decision of Luxottica India Eyewear (P.) Ltd. v. Dy. CIT [ITA No. 617/Del/2015 dated 05.11.2014, where the Tribunal held: "Coming to the argument that the assessee himself has adopted TNMM as the MAM for its transfer pricing study and hence it cannot turn around and argue for adoption of RSPM as the MAM, we find that the Mumbai Bench of the Tribunal in the case of Mattel Toys (I) Pvt. Ltd. in I.T.A. No. 2476/Mum/2008 held as follows. "41. Now coming to the argument of the Ld. DR that once the assessee itself has chosen TNMM as ....
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....reject the contentions of the Ld. DR and also the observations of the AO and the Ld. CIT(A) that the assessee cannot resort to adoption of RPM method instead of TNMM."' 14. The ITAT in this case, accordingly held that even though the assessee had in its transfer pricing report, relied on TNMM as the Most Appropriate Method, that ipso facto, cannot preclude the transfer pricing officer or the appellate authorities from adopting a different method for calculating the arms' length price, if that is found to be the Most Appropriate Method. 15. This Court finds that the ITAT's reasoning on this issue is without flaw. The ITAT's reasoning, relying on the decision in Luxottica India Eyewear (P.) Ltd. (supra), that since the ultim....