TaxTMI 
TaxTMI 
2022 (2) TMI 1063
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....ested party as per Indian Transfer Pricing Regulations? (b) Whether the Hon'ble Tribunal has committed substantial error in law in considering the segmental accounts which do not from part of the audited financial statements for determination of arm's length price? (c) Whether the Hon'ble Tribunal has committed substantial error in law in holding intra-group services in the nature of stewardship activities/shareholder activities? We have heard Mr. P.K. Bhowmik, learned standing counsel, assisted by Mr. Soumen Bhattacharjee, learned counsel for the appellant/revenue and Mr. J.P. Khaitan, learned senior standing counsel, assisted by Mr. Anirban Ghosh and Mr. Akhilesh Gupta, learned counsel for the respondent/assessee. Three issues arise for consideration in the case on hand. The first issue is whether the Associated Enterprises (AE) of the respondent/assessee could have been accepted as a tested party for the purpose of determining the Arms Length Price (ALP) and whether there is a bar from doing so under the Indian Transfer Pricing Regulations. The second aspect is whether the Tribunal was right in directing the assessing officer to accept the segmental an....
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....dras). The relevant portion of the judgment is quoted hereinbelow : "20. Now, we move on to consider the issue as to whether the assessee has to be taken as tested party for the purpose of determination of ALP or by applying the least complex theory, the AE outside the Country has to be taken as tested party. The Tribunal while considering the said question proceeded to examine the scheme of transfer pricing as provided under the Act. It referred to section 92B which defines 'International transaction', section 92A which defines 'Associated Enterprise', Rule 10D which deals with the most appropriated method for determination of ALP and rule 10B(1)(e) which provides the method for determination of ALP by adopting TNMM. After referring to these statutory provisions, the Tribunal would observe that the main object is to compute the net profit margin realised by the enterprise from the international transaction; the comparison shall be with regard to the transaction of unrelated enterprise from comparable uncontrolled transaction. Thus the Tribunal opined that the net profit margin of the enterprise shall be computed in the international transaction by comparin....
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....ection of tested party has been culled out wherein it has been held that the tested party normally should be the least complex party to the controlled transaction and that there is no bar for selection of tested party either local or foreign party and neither the Act nor the guidelines on transfer pricing provides so and the selection of tested party is to further the object of comparability analysis by making it less complex and requiring fewer adjustment. Therefore, we do not agree with the reasons given by the Tribunal for not considering the decision in Ranbaxy Laboratories Ltd. 23. Furthermore from the grounds canvassed in the miscellaneous application filed before the Tribunal on 28-9-2017, after the impugned order was passed by the Tribunal, would clearly show that all materials were available on file. Therefore, to non-suit the assessee stating that they miserably failed to establish functional risk is incorrect. If such is the conclusion which we have to arrive at, we have no hesitation to set aside the order of the Tribunal and we shall do so. 24. Before doing so, we may point out the following. The assessee in ground Nos.6 to 8 before the Tribunal had c....
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....ecision of the Ahemdabad Tribunal in the case of General Motors India (P.) Ltd., which had taken note of the decision of the Mumbai Tribunal in Aurionpro Solutions Ltd. and noted the facts of the said case and held that the said decision cannot be applied as the main issue in Aurionpro Solutions Limited was the percentage of interest to be calculated on the loan advanced by the assessee to its AE. Thus, on facts the decision in Aurionpro Solutions Ltd. could not have been applied to the facts of the assessee's case before us. As already pointed out, it is not a case where there were no material produced by the assessee to establish the functional risk assumed by the foreign AEs. The material was available before the TPO but the TPO non-suited the assessee on the ground that such contention by referring to the foreign AEs as tested party was not part of TP documentation. This finding is incorrect. Interestingly in the case of in the case on hand the TPO rejected the data placed by the assessee in their TP documentation and undertook a fresh search for external comparables and arrived at a final list of 12 comparables. Therefore, when the TPO himself has not attached any sanctity....
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....een ad hoc sales of traded finished goods lying in stock to the AE. Further, the assessee has received commission at 3 per cent on account of facilitating the direct sale by AE to third parties in India. So far as the nature of activities of the assessee is concerned, the assessee made purchases only from AEs and received commissions from AEs and there are three AEs in different countries and the TPO took entity level margins of the assessee and made the transfer pricing adjustment on that basis. It appears that the assessee did not raise this issue during the proceedings before the TPO. However, before the DRP the assessee has raised such an issue contending that the assessing officer failed to provide due cognizance to the fact that in relation to the purchase of the finished goods, receipt of commission and sale of finished goods, the assessee was engaged in trading functions and on the contrary selected a set of comparables having different functional profile. The DRP, on noting that such issue was raised by the assessee before it for the first time, forwarded the contention to the TPO for his consideration and submit a remand report. The TPO in his remand report held that the ....