2024 (2) TMI 1489

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....AY 2013-14. Connected appeal being ITA 429 of 2022 pertains to AY 2016-17 and essentially follows the judgment rendered by the ITAT and which forms subject matter of ITA 269 of 2019. In view of the aforesaid, we propose to briefly notice the facts as they obtain in the aforenoted appeal for AY 2013-14. 2. The respondent / assessee is stated to be a constituent of Chimica Organica Industriale Milanese COIM group of companies and is engaged in trading of polyurethane products, manufacture and trading of polycondensation products and laminating adhesives under the brand name of NOVACOTE and IMUTHANE. It submitted its Return of Income ROI for AY 2013-14 on 28 November 2013. Its case was referred to the Transfer Pricing Officer TPO in terms of ....

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....e functional profile of the assessee is that of a pure trading concern without any value addition to product and when assessee is also incurring marketing expenses for the products purchased from AE? C. Whether ITAT has erred in deleting the adjustment without considering the fact that there was no change in functional profile of the Assessee and any third party would not have agreed to such a reduction in commission rate? D. Whether ITAT has erred in deleting the adjustment without considering the fact that not charging interest on receivable after a stipulated time is subject matter of benchmarking?" 5. The ITAT has principally faulted the decisions and directions rendered by the TPO and DRP upon finding that the assessee had adopt....

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....ded. In other words, the TPO and the appellate fora were aware that in accordance with the rules, a comparison the profit margin of LFIL with that of other similarly functioning companies was shown, and is, at the first instance, relevant to determine the ALP. The profit margin, as well as the cost plus model adopted by LFIL, was not shown to be distorted or of such magnitude as to persuade the tax authorities into discarding the exercise altogether. Having not contradicted this comparison the Revenue proceeded to its own determination and calculations. This however, is improper, given that the assessment carried out by the assessee must first be rejected, for any ITA 306/2012 Page 36 further alterations to take place. Indeed, it cannot be ....

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.... 12. Facts on record show that the TPO has not discarded the exercise undertaken by the assessee in determining the ALP of the international transaction relating to payment of royalty and technical fees. In light of the afore stated judgment of the Hon'ble Jurisdictional High Court [supra], action of the TPO is bad in law and the DRP grossly erred in affirming the action of the TРО." 6. It has also adversely commented upon the TPO as well as the DRP undertaking an exercise in seeking to re-evaluate the cost of raw materials purchased. Insofar as this aspect is concerned, it has found that both the TPO as well as the DRP erred in proceeding to consider issues which travelled far beyond the determination of ALP. It has also ....