TaxTMI 
TaxTMI 
2022 (9) TMI 1505
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....siness of wholesale trading of puma branded products. The assessee is a wholly owned subsidiary of Puma Austria and is a licensed distributor engaged in the wholesale trading of group projects/merchandise including footwear, apparel and accessories. The assessee filed return of income for AY 2015-16 on 29.11.2015 declaring total income of Rs.46,77,94,170/- The case was selected for scrutiny and reference was made to the Transfer Pricing Officer (TPO) to determine the arm's length price (ALP) of the international transactions the assessee had with its associated enterprises (AE). The AO determined a TP adjustment of Rs.6,65,42,022/-. Aggrieved, the assessee raised its objections before the DRP. 3. The DRP vide its directions dated 27.09.2....
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....decision by way of a speaking and reasoned order. In reply, both sides agreed to this proposition but this was the common request of both sides that all aspect of the matter about T P adjustment should be left open for a fresh decision by DRP." 4. The DPR in the remand proceedings vide order dated 25.01.2022 retained the same TP adjustment as in the earlier round. The assessee is now in appeal against the order giving effect to the order of the ITAT. 5. The assessee raised 13 grounds of appeal. During the course of hearing the learned A.R. submitted that out these grounds he is contending only the following issues with regard to TP adjustment: i. Exclusion of Metro Shoes Ltd. ii. Exclusion of Sreeleathers Ltd. ....
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....ting Cost 6389955292 Operating profit 514379084 Operating Profit/Operating Revenue 7.45% 8. The assessee chose five comparable companies in the transfer pricing study. The TPO rejected the comparable companies chosen by the assessee and proceeded to select fresh set of comparable companies by applying different filters. The final set of comparable companies, selected by the TPO the mean margin of which worked to be 12.63%. is given in the table below : - Sr.No Company Name Weighted PLI for three Years (OP/OR) (%) 1 Metro Shoes Ltd. 13.78 2 V F Brands India Pvt. Ltd. 14.56 3 Tommy Hilfiger Arvind Fashion Pvt. Ltd. 8.24 4 Solace Fashon Pvt. Ltd. 8.81 5 Sreeleathers Ltd. 1....
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.... Metro shoes is primarily engaged in trading of footwear similar to the business of the assessee. Hence the company is functionally similar to the assessee. Hence the plea of the assessee is rejected and the view of the TPO is upheld. Sreeleathers Ltd: Having considering the submissions, it can be noted that both the TPO and the assessee were in consensus on not applying the wholesale/retail filter to filter out companies. Hence, the assessee contention that the company has both wholesale and retails wings is not valid and accordingly the plea of the assessee is rejected. 10. With regard to the exclusion of Metro Shoes Ltd., he learned A.R. submitted that the company does not pass the more than 75% filter applied by the TPO indicating....
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.... the trade filter of more than 75%. We further notice from the financials of Metro Shoes Ltd., that the company has paid customs duty. We do not see any merit in the contention of the DRP that Metro Shoes is also primarily engaged in trading of footwear similar to the business of the assessee while rejecting the plea of the assessee on the application of trade filters. In view of this discussion we hold that Metro Shoes fails the trade filter of more than 75% and therefore should be excluded from the comparable companies. 13. With regard to the exclusion of Sreeleather Ltd: the learned A.R. contended that Sreeleather Ltd. is engaged in both wholesale and retail trading of footwear and leather articles. The learned A.R. drew our attention....
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....er the market in which the companies are operating is wholesale or retail needs to be considered. In the given case the financials of Sreeleather Ltd., which is extracted below shows that the company is deriving major part of its revenue from ritual business: - Sl. No. Name & Description of main products/ services NIC Code of the Product/Service % of total turnover of the company 1. Footwear expenses 51312 12.78% 2. Footwear Retail 52323 66.76% 3. Leather Goods for Accessories 52324 20.46% 16. We also notice that the assessee has raised this contention before the DRP which is not been considered by the DRP by stating that it is not valid since the TPO and the assessee were in consensus in n....