TaxTMI 
TaxTMI 
2025 (3) TMI 1269
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....the case and in law, the Hon'ble Dispute Resolution Panel ('DRP'), the Learned Transfer Pricing Officer ('Ld. TPO') and the Ld. AO (hereinafter collectively to be referred as 'Revenue') has erred in making an adjustment of INR 145,266,260 to the total income of the Appellant for the relevant A Y, as against the returned income of Nil filed by the Appellant. 2. On the facts and in the circumstances of the case and in law, the Hon'ble DRP has grossly erred in not undertaking independent verification of the objections along with supporting documentation, submissions and additional evidence application filed by the Appellant, and by not issuing speaking directions, and rather restoring certain transfer pricing and corporate tax matters to the Ld. TPO and Ld. AO for consideration and thereafter passing a speaking order, which is in gross violation of section I 44C(8) of the Act and thus, the final assessment order passed for the relevant A Y is bad in law. Transfer Pricing Grounds: A. Erroneous adjustment of INR 73,389,756 relating to transfer pricing with respect to international transaction pertaining to Purchase of Finished G....
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....llowance of [N R 4,141,229 under section 37 of the Act 8. On the facts and in the circumstances of the case and in law, the Ld. AO has erred in making an incorrect disallowance of INR 4,141,229 under section 37 of the Act for the relevant A Y by questioning the genuineness of certain expenses and its nexus to the Appellant's business without giving due opportunity to the Appellant for explaining the relevant facts prior to the passing of final assessment order. C. Incorrect addition of [NR 8,497,174 made under section 69C of the Act 9. On the facts and in the circumstances of the case and in law, the Ld. AO has erred in making an incorrect addition of INR 8,497,174 on account of difference between custom duty actually paid by the Appellant amounting to INR 162,434,730 during the relevant A Y and custom duty alleged to be paid by the Ld. AO amounting to INR 170,931,094 based on CBEC Export Import data available with the department, ignoring the documents furnished by the Appellant on record and unwarrantedly seeking explanation/ reconciliation for above difference in custom duty paid without providing the CBEC Export Import data to the Appellant. ....
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....forward loss and Rs. (-) 14,88,27,460/- as deemed income u/s 115JB of the Act. The case was selected for complete scrutiny. Accordingly, notices u/s 143(2) and 142(1) were issued and served on the assessee. The assessee has declared international transactions in its annual report in Form 3CEB. Accordingly, the case was referred to TPO. The TPO observed that assessee has declared purchase of finished goods from its AE for the value of Rs. 61,05,60,691. He observed that as per the report submitted by the assessee, assessee has declared margin of 10.05% (GP/Sales) in this segment on the basis of management account. The assessee has conducted a search on the Prowess and Capitoline Plus plus databases and arrived at a set of four comparables. The average of these comparables are at 11.10%. The same is reproduced below :- Sl.No. Data Source Company Name GPB 2015 (%) GPB 2016 (%) GPB 2017 (%) Weighted Average (%) 1 AR OK Glass Fibre Ltd. 12.41 10.65 NA 11,47 2 AR Rafbrix Ltd. 6.54 6.18 NA 6.31 3 AR Solid Stone Co. Ltd. 20.50 14.69 NA 17.58 4 Prowess Mineral Oriental Ltd. (Name change to Intelipro ....
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.... accepted. The Company passes all the filters proposed by the Ld. TPO. The Company is engaged trading in marble blocks and slabs, which is functionally similar to the Assessee which is mainly engaged in trading of fibrerock, gypsum boards, tiles, metal studs, grids and other goods. 4. OK Glass Fibre Ltd Assessee To be accepted The Company passes all the filters proposed by the Ld. TPO. The Company is engaged trading of fibre glass products, which is similar to the Assessee which is mainly engaged in trading of fibrerock, gypsum boards, tiles, metal studs, grids and other goods. 7. After considering the submissions of the assessee, the TPO rejected the submissions of the assessee and dealt with the same as under :- SI. No. Company Name Assessee's contention TPO's observation 1. T B K Deepgiri Tile bath Kitchen Pvt. Ltd. To be rejected. * This company fails the RPT filter of 25% applied by the Ld. TPO * Functionally not comparable: Engaged in the business of trading of bathroom fittings, kitchen wares, etc. This company does not fail RPT filter. This comparable has been ....
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....I was accepted by the TPO in all preceding assessment years and the FAR of the assessee in the year under consideration is identical to the FAR of the preceding years. Assessee made detailed submissions before the ld. DRP. After considering the detailed submissions of the assessee, ld. DRP observed that assessee has filed detailed submissions before the TPO vide letter dated 25.01.2021, however there is no discussion in the TPO order as to what submissions were made by the assessee as regards the justification for RPM as the MAM or gross profit margin as PLI. The TPO was directed to consider the argument of the assessee in support of RPM as MAM and RPM as PLI and directed the TPO to pass a speaking order justifying applicability of MAM and PLI keeping in view the FAR profile of the assessee. Further assessee has raised objection on the issue of denying working capital adjustment under Rule 10B(1)(c) of the Rules for determination of ALP to account for differences in working capital employed by the assessee vis-à-vis comparable companies. After considering the submissions of the assessee, ld. DRP directed the TPO to compute the working capital in accordance with the OECD Guid....
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....fit is provided for functions performed, tangible and intangible assets employed, and risks borne. RPM takes the price at which a product/service is resold to an independent third party and reduces the resale price by an appropriate gross margin, representing the amount out of which the reseller would seek to cover its selling and operating expenses and, in the light of its functions and risks, make an appropriate profit. Knauf India Private Limited is not a pure distributor of tangible products. As per TP study report, it relates to sale of traded goods, purchase of finished goods, availing of engineering support services, business support services and IT expenses income which means that this method is prima facie unlikely to be appropriate for assessing whether the proposed pricing of the company's international associated enterprises transactions is at arm's length. Hence, RPM would not be appropriate for the benchmarking of the impugned transaction. For the above mentioned reasons, the use of RPM for the purpose of benchmarking by the taxpayer is rejected. Since, TNMM is tolerant to above mentioned inconsistencies and also a reasonable adjustments can ....
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....our notice TP study report submitted by the assessee before the TPO and he brought to our notice page 276 of the paper book wherein assessee has submitted FAR analysis and trading functions of the assessee wherein assessee purchases goods from its AE and sell the same to customers. He submitted that same method of trading was adopted by the assessee over the years. Further he brought to our notice page 334 of the paper book wherein assessee has submitted a segmental profitability before the TPO wherein assessee has clearly bifurcated the manufacturing segment and trading segment separately. He submitted that assessee has earned GP/Sales of 43% in manufacturing segment and in trading segment with its AE, achieved profit of 10.05% and with non-AE it has achieved 10% and in overall entity level, the assessee has achieved 26%. He submitted that TPO has not considered the abovesaid segmental report. He further submitted that assessee is not doing any value addition with regard to trading activities. In this regard, he relied on the decision of Hon'ble High Court of Delhi in the case of Pr.CIT vs. Fujitsu India Pvt. Ltd in ITA 34/2019 & ors. order dated 12.10.2023; Mumbai Bench of ITAT i....
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....hat RPM method is prima face unlikely to be appropriate for assessee. Therefore, RPM would not be appropriate for benchmarking of the impugned transactions. In our considered view, TPO has misunderstood the clear directions of the DRP on the aspect of FAR profile of the assessee and applicability of RPM in the case of the assessee which was accepted by the Revenue in the earlier assessment years. There is no clear finding on the aspect of non-applicability of RPM and TPO merely and grossly rejected the RPM with the observation that assessee is not a pure distributor and it also does manufacturing activity. In our considered view, the TPO has grossly misunderstood the business of the assessee and proceeded to complete the ALP on the basis of TNMM method. In our considered view, the TPO has to redo the ALP adjustment on the basis of various details available on record which shows that assessee has two segments - (a) manufacturing and (b) trading activities - and the ALP of the trading activities was accepted by the Revenue in the earlier assessment years on the basis of RPM. Therefore, we are inclined to remit this issue back to the file of AO/TPO to redo the ALP adjustment on the ba....
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....sing Officer to consider the additional evidences submitted by the assessee and allow the same as per law. In final assessment order, Assessing Officer considered the additional evidences submitted by the assessee and analysed each expenditure in detail and to the extent of vouchers/bills submitted by the assessee, he allowed the same and to the extent of Rs. 41,41,229/- no evidences were submitted. Accordingly, he sustained the addition. 23. Aggrieved with the above order, assessee is in appeal before us raising ground of appeal and before us, assessee has filed application for admission of additional evidences. After considering the submissions of the assessee, we are inclined to remit this issue to the file of Assessing Officer to verify the additional evidences submitted by the assessee. Accordingly, we direct the Assessing Officer to verify the additional evidences and allow the claim of the assessee as per law, after giving proper opportunity of being heard to the assessee. Accordingly, ground no.8 raised by the assessee is allowed for statistical purposes. 24. With regard to ground no.9, relevant facts of the case are, during assessment proceedings, Assessing Officer o....