2022 (3) TMI 1460

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..../ contentions raised by the Assessee and further erred in making several allegations, observations, assertions and inferences in the order, which were both factually incorrect as well as legally untenable; 3. The assessee is a Private Limited Company engaged in trading in sanitary wares. Return of income was filed on 30.11.2017 declaring total income of Rs.5,15,66,780/- which was processed u/s 143(1) of the Income Tax Act, 1961. The case was selected for scrutiny for verification of a few issues including verification of large value of International Transactions. Since the issue was related to determination of Transfer Pricing, a reference was made to the Transfer Pricing Officer for determination of Arm's Length Price u/s 92CA(3) of the Act. On the other issues, a notice u/s 142(1) of the Act was issued to the assessee on 02.02.2021 followed by letters issued on 23.02.2021 and 01.03.2021 seeking clarifications on its reply. In response, the assessee furnished reply on 23.02.2021, 27.02.2021 and 05.03.2021 explaining the issues raised in the notices. 4. The TPO unit-2(1)(1), New Delhi vide its order dated 14.01.2021 passed u/s 92CA(3) of the Act made adjustment of Rs.7,51,50,....

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.... Rs. 13,16,71,310/- as against the declared total income of Rs. 5,15,66,780/-. The assessee filed its objection before the DRP and the DRP on considering the objection filed by the assessee, passed the order u/s 144C of Income Tax Act, 1961 on 31/08/2021. The Ld. DRP recording the following held that TNMM is the most appropriate method for the assessee in the relevant Assessment Year. "(ii) It is stated by the assessee that the Ld. TPO in Assessment Year 2010-11 accepted RPM as MAM for benchmarking the transaction in relation to purchase of finished goods for distribution. Further, during Assessment Year 2011-12 , the Hon'ble DRP ruled in favour of the assessee and directed the Ld. TPO to consider RPM as MAM. It is stated that vis-à-vis Assessment Year 2010-11 and 2011-12, there has been no fundamental change in the facts and circumstances, functions, assets and risk (FAR) profile of the assessee, business dynamics or the nature of international transactions undertaken by the assessee during the captioned Assessment Year. Since, there has been no change in the qualitative/business profile of the Assessee from one year to the next, therefore, changing the method for ....

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....n of Ld. TPO at Para 7.3.4 at page No. 14 of the order for the year under consideration is factually incorrect. 14. In so far as adoption of TNMM as MAM for the year 2012-13, 2013- 14 & 2016-17 by the assessee in those years are concerned the Ld. AR referred to the TP study of the previous Assessment Year 2016-17 where the RPM has been acknowledged as MAM for bench marking trading segment, in so far as aggregation of transaction pertaining to the receipt of Management Support Services, the RPM has not been acknowledged as MAM. The relevant extract of the TP study for Assessment Year 2016-17 pertaining to the receipt of management support services is as under:- "In this instant case, though RPM is also appropriate and applicable based on the facts of the case but arm's length result for the trading operations of Grohe India have been determined by applying TNMM. This is due to the aggregation of the transaction pertaining to the receipt of management support services." (emphasis supplied) 15. Further, the Ld. AR argued that, in the Assessment Year 2012-13 and 2013-14, the appellant has adopted aggregation of transaction pertaining to receipt of management sup....

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....r not. The determination of approximate ALP is the key factor for which most appropriate method is to be followed. Therefore, if at any stage of the proceedings, it is found that by adopting one of the prescribed methods other than chosen earlier, the most appropriate ALP can be determined, the assessment authorities as well as the appellate Courts should take into consideration such a plea before them provided, it is demonstrated as to how a change in the method will produce better or more appropriate ALP on the facts of the case. Accordingly, we reject the contentions of the learned Departmental Representative and also the observations of the Assessing Officer and the learned Commissioner (Appeals) that the assessee cannot resort to adoption of RPM method instead of TNMM) (refer para 41 on page no. 88 of Case Law Compendium ('CLC') 17. As per the above observation/Order of the Coordinate Bench, it is clearly evident that there is no bar or embargo to change MAM method even if the assessee himself adopted different method in its own TP study for the year in dispute. The appellant's case is rather on a much better footing on account of the reason that it had consistentl....