TaxTMI 
TaxTMI 
2025 (5) TMI 2130
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....9,430. 2. The impugned assessment order passed by Ld. AO and Learned Transfer Pricing Officer ("Ld. TPO") are bad in law, null and void-ab-initio as being passed basis a faulty reason of reference in Computer Assisted Scrutiny Selection ("CASS") as well as for Transfer Pricing reference. Grounds against transfer pricing ("TP") adjustment 3. On facts and circumstances of the case and in law, the Ld. AO/ Learned Transfer Pricing Officer ("Ld. TPO") erred on facts and in law in enhancing the income of the Appellant by INR 4,34,45,060/-pertaining to international transaction of sale of goods - felt packing material that do not satisfy the arm's length principle envisaged under the Act and in doing so, have grossly erred in. 3.1. erroneously rejecting the arm's length price ('ALP") as determined by the Appellant in the TP documentation maintained by it in terms of section 92D of the Act read with Rule 10D of the Income-tax Rules, 1962 ("Rules"); 3.2. conducting a fresh comparability analysis based on the application of erroneous additional /revised filters in determining the ALP for the Appellant and rejecting the filters applied by the Appellant in its TP document....
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.... but also maintaining, enhancing and promoting the brand owned by AE 4.7. violation of orders of various High Court rulings by treating the routine selling expenses incurred by the Appellant as non-routine AMP expenses which have further been assumed to have been incurred solely towards brand promotion of the AE. 4.8. proposing protective adjustment applying bright line test ("BLT") as a 'tool to benchmark the alleged international transaction, even though BLT is not a prescribed method under the purview of section 92C of the Act and has been rejected by the Hon'ble High Court 4.9. re-characterizing the Appellant's business profile and carrying out a flawed intensity based net margin analysis, which applies the same parameters as were used for application of bright line analysis. 4.10. not appreciating that the margins earned by the Appellant compensates it for alleged excessive AMP expenses. 4.11. erroneously not sharing detailed search methodology and wrongfully selecting the inappropriate comparable companies and applied incorrect margins for the purpose of adjustment using bright line approach and intensity based net margin analysis approach. Grounds aga....
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.... Section 144B of the Act by making TP adjustment of Rs. 4,34,45,060/-. Aggrieved by the final assessment order dated 23/07/2024, the Assessee preferred the present Appeal on the Grounds mentioned above. 4. Ground No. 1 & 2 are general in nature and Ground No. 5 of the Assessee's Appeal has been not pressed. Hence, Ground No. 1, 2 and 5 of the Assessee are dismissed. 5. Ground No. 3 is regarding TP Adjustment of Rs. 4,34,45,060/- pertaining to international transaction of sale of goods /felt packing material. The Assessee purchased felt bags for the purpose of resale to its AE and such felt bags are used as first layer covering for LV bags. During the TP study, TPO accepted all the 5comparables selected by the Assessee in its TP documentation and the same were included in the final set of comparables. The Ld. TPO included additional 10 comparables and as per the TPO, the Arm's Length Range of total 15 comparable companies ranges from 10.49% to 17.03% with a median of 11.43%. 6. The ld. Counsel for the Assessee vehemently submitted that the TPO has accepted all the five comparables selected by the appellant, the TP has also accepted the method selected by the appellant as well as ....
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.... 7 NivakaFashins Ltd. TPO 10.53% 8 7NR Retail Ltd. TPO 11.34% 9 Aarnav Fashions Ltd. TPO 11.56% 10 Euro Vistaa India Ltd. TPO 17.03% 11 New India Retailing & Investment Ltd. TPO 34.05% 12 V2 Retail Ltd. TPO 44.47% 13 V-mart Retail Ltd. TPO 47.54% 14 Raymond Apparel Ltd. TPO 71.48% 15 Tengerine Design Pvt. Ltd. TPO 71.54% Median 11.34% 35th Percentile 10.49% 65th Percentile 17.03% 9. In the Ground No. 3, the Appellant seeking exclusion of 10 comparables, which were included by the TPO mentioned at Serial No. 6 to 15 of the above mentioned chart. Considering the submissions of both the parties, those comparables are adjudicated as under:- 10. Tangerine Design Private Limited This company has been held to be suitable on the ground that the above Company is engaged in the similar type of functions. Further TNMM provides wider flexibility to select comparable in terms of FAR Analysis. Further, observed that this company passes all filters. Thus, rejecting the contention of the Appellant, the TPO/A.O. retained the above Company in the final list of comparable. 10.1. ....
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....fers significantly. Therefore, Raymond Apparel Limited is not appropriate comparable. 12. Shiva Suitings Limited This company has been held to be suitable on the ground that the above Company is engaged in the similar type of functions and it passes the filters. Further, TNMM provides wider flexibility to select comparable in terms of FAR Analysis. Rejecting the contention of the Appellant, the Ld. A.O/TPO retained the above Company in the final list of comparables. 12.1. The above Company is mainly engaged in the business of trading and manufacturing of textile which is evident from the Annual Report for financial year 2019-20 produced by the Appellant at Page No. 945 of Paper Book Volume 2. Since Shiv Suiting Limited is engaged in the manufacturing of textile which is not similar to the trading of goods made by the Appellant, further the segment details for its trading activity is not available in the financial statements, the said Company is not appropriate comparable. 13. V-Mart Retail Limited This company has been held to be suitable on the ground that this company is mainly engaged in similar type of functions and it is passing the filters. Further, TNMM provides wider f....
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....the company is engaged in retail trade of apparel and garments, retail trade of fashion accessories and retail trade of textile products. The above facts can be corroborated from the Annual Report of the said Company. 14.2 Further, V2 Retail Limited operates as well-known value-fashion retail chains, catering directly to price-sensitive consumers. Their business model relies on brand recognition, customer footfall, store experience, and seasonal fashion trends. In contrast, the Appellant is selling felt packaging material which serve as protective outer layer for its bags, apparel and accessories are finished consumer products sold in the retail market. The pricing, value drivers, and market dynamics for branded consumer goods differ significantly from those of packaging material. As fundamental nature of business and product differs significantly, V2 Retail Limited cannot be an appropriate comparable. 15. 7NR Retail Limited This company has been held to be suitable on the ground that this company is mainly engaged in similar type of functions and it is passing the filters. Further, TNMM provides wider flexibility to select comparable in terms of FAR Analysis. Thus, rejecting th....
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....are from sale of traded products i.e. readymade garments which can be corroborated from Page No. 66 of the Annual Report of the said Company. Whereas Appellant sells felt packaging materials used as protective outer layers, garments are finished consumer products sold in the retail market. The pricing, value drivers, and market dynamics for branded consumer goods differ significantly from those of packaging material. Therefore, New India Retailing & Investments Limited cannot be an appropriate comparable. 17. Arnav Fashions Ltd. This company has been held to be suitable on the ground that this company is mainly engaged in similar type of functions and it is passing the filters. Further, TNMM provides wider flexibility to select comparable in terms of FAR Analysis. Thus, rejecting the contention of the Appellant, the Ld. A.O./TPO retained the above Company in the final list of comparables. 17.1. The above Company operates as an integrated financial services company. The company provides diversified financial services and trading of textile, which can be corroborated from the Annual Report of the company at Page No. 920 of the Paper Book volume 2. Since, the Arnav Fashions Ltd. is....
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....ka Fashions Ltd. and Euro Vistaa India Ltd., from the final set of comparable for determining the Arm's Length Price in the international transaction. Accordingly we allow the Grounds of Appeal No.3 of the Assessee. 21. Ground No. 4 is regarding adjustment of Rs. 1,84,35,150/-on protective basis on the ground of excess advertisement, marketing and promotion expenditure. 22. The Ld. Counsel for the Assessee submitted that Bright Line Test does not have a statutory mandate and cannot be applied in order to determine the international transaction relate to incurring of AMP Expenses on behalf of AE. The Ld. Assessee's Representative placed reliance on Assessee's own case for Assessment Year 2012-13 in ITA No. 980/Del/2017, order dated 10/07/2017 and other Judgments of Hon'ble High Court of Delhi mentioned as under and sought for allowing the Ground No. 4.:- i. Sony Ericsson Mobile Communications India Private Limited & Others (ITA No. 16/2014 and connected matters) ii. Bausch& Lomb Eye care (India) Pvt. Ltd. (ITA No. 643/2014) iii. Whirlpool of India Ltd. [ITA No. 610/2014] 23. Per contra, the Ld. Departmental Representative relying on the orders of the Lower Authoriti....