TaxTMI 
TaxTMI 
2025 (9) TMI 1188
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....("TP") adjustment 2. 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 113,467,375/- pertaining to distribution segment that do not satisfy the arm's length principle envisaged under the Act and in doing so, have grossly erred in: 2.1. 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"); 2.2. 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 documentation; 2.3. erroneously including certain companies in the final comparable set that are functionally dissimilar as compared to the functional profile of the Appellant; 2.4. committing factual/computational errors while computing the operating margins of certain comparable companies; 2.5. committing computational errors ....
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.... Transfer Pricing Officer ('TPO'). However, the appellant assessee has provided SDS and MSS solely to its AE. The risk of sole customer has not been considered by the assessee in its TP Study Report. Therefore, the TPO made adjustment of Rs. 8,33,180/- under the head SDS segment and Rs. 16,50,678/- under the head MSS segment in order passed under section 92CA(3) of the Act. 3.2 Further, the TPO examined comparables of Distribution Segment selected by the appellant assessee in its TP Study. Out of 8 comparables selected for Distribution Segment by the appellant assessee in its TP Study, the TPO rejected 1 comparable based on the reasoning detailed on page 47- 48 of in the order passed under section 92CA(3) of the Act. The TPO thereafter, picked up 10 new comparables in the final list of 17 comparables as detailed on page 48-50 of the order passed under section 92CA (3) of the Act. Due to new comparables, the TPO proposed the adjustment of Rs. 22,90,44,906/- under the head 'Distribution Segment'. 3.3 In the draft assessment order, the AO made three adjustments; (i) Rs. 8,33,180/- under the SDS segment, (ii) Rs. 16,50,678/- under the MSS segment and (iii) Rs. 11,34,67,375/- unde....
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....of APIs from AEs and converting the same into formulations by using services of third party viz. Gland Pharma. (ii) Tolling: Import/purchases of APIs from third party (non-AE) and thereafter, converting the APIs into formulations using third party manufacturing facility under the supervision of the assessee. (iii) Contract manufacturing: The assessee engages third party viz. Zyg Pharma and Encore Pharma to purchase the APIs from approved sellers of API, manufacture the formulations as per specifications given by the assessee, under supervision of the assessee and under the Brand name of assessee. (iv) Distribution: In this segment the assessee purchases finished formulations from its AEs and distributes/sells the same in India. The assessee acts as a distributor of the formulations manufactured by its AEs. The ld. Counsel for the assessee submits that in so far as segment (ii) and (iii) are concerned there is no dispute. The dispute is with respect to determination of arm's length pricing (ALP) in segment (i) and (iv). 6. Per contra, the ld. CIT-DR drew our attention to page No. 2 of Paper Book (PB) -II containing the Director's r....
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.... submitted that Nureca was functionally dissimilar and thus was not a suitable comparable as it was engaged in the business of trading of home and healthcare wellness products. It was submitted that products dealt in by the Nureca were quite different than those of appellant assessee. Thus, he prayed for exclusion of these two comparables as these failed RPT filters. Further, the Ld. AR also contended that Carestream India dealt in pharma products which were quite different than the products of Agilent Group. 9. Per contra, the Ld. CIT-DR submitted that the issue of RPT failure had never been raised by the appellant assessee either before the TPO/AO or DRP; therefore, this issue/parameter had not been examined by Authorities below. The Ld. CIT-DR, drawing our attention to page No. 703 of the PB-I and page No. 27 of the DRP directions, submitted that neither the TPO nor the Ld. DRP had ever verified the RPT filters of these two comparables as the appellant assessee had never raised this issue before. Further, the Ld. CIT, drawing our attention to the financials of Nureca, submitted that this comparable did not fail in RPT Filters. He also drew our attention to the fact that the P....