TaxTMI 
TaxTMI 
TaxTMI 
2026 (1) TMI 131
X X X X Extracts X X X X
X X X X Extracts X X X X
....Delhi High Court wherein the Hon'ble Court in ITA No.928/2017 vide its order dated 20.11.2024 has remand the matter to back to the Tribunal to consider and decide the grounds of appeal raised in respect of TP adjustment pertaining to import of finished goods. The observations given by the Hon'ble High Court in para 12 to 15 are as under: "12. Mr. Nageshwar Rao, the learned counsel appearing for the Assessee referred to the grounds of appeal filed before the learned ITAT and had drawn the attention of this Court to grounds raised for challenging the adjustment in respect of transactions pertaining to purchase of finished goods. The said grounds are set out below: "4.1 That the action of Hon'ble DRP/Ld. AO/Ld. TPO of rejecting the Resale Price Method ("RPM") applying Transaction Net Margin Method ("TNMM") as the Most appropriate Method ("MAM") under section 92C of the Act to determine ALP of impugned international transaction is completely arbitrary and calls for being reversed. 4.2 That the Ld. AO/Ld. TPO/Hon'ble DRP while rejecting RPM as the MAM, erred in ignoring the fact that the Appellant had earned sufficient gross margins vis-a-vis the compa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....espect of transactions pertaining to purchase of the finished goods." 4. While addressing these grounds of appeal, at the outset, Ld. AR for the assessee drew our attention to the order of the Co-ordinate Bench of Tribunal in the case of assessee itself in Assessment Year 2009-10 in IT(TP)A No.1115/Del/2014 wherein vide order dated 06.05.2014, Co-ordinate Bench has held that "Resale Price Method" as most appropriate method (MAM). The Co-ordinate Bench further directed the TPO to adopt the 'Resale Price Method' as MAM and compute the arm length price of the transaction of purchases of finished goods. The relevant observations as contained in para 9 to 10.5 of the said order are reproduced as under: "9. After hearing rival contentions we hold as follows. 10. The undisputed fact is that the functional profile of the assessee is trading in sun glasses and sun glass frames. It purchases and sells goods without any value addition. In fact the TPO in the original show cause notice has, in our view, correctly stated as follows. "5. From the details filed by the assessee, it is observed that the company has been established primarily for the purpose of carrying....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng the contentions/objections before the TPO or the appellate Courts that such a method was not an appropriate method and is not resulting into proper determination of ALP and some other method should be resorted. The ultimate aim of the TP is to examine whether the price or the margin raising from an international transaction with the related party is at ALP or not. The determination of approximate ALP is the key factor for which the MAM is to be followed. Therefore, if at any stage of the proceedings, it is found that by adopting one of the prescribed methods other than chosen earlier, the most appropriate ALP can be determined, the assessment authorities as well as the appellate Courts should take into consideration such a plea before them provided, it is demonstrated as to how a change in the method will produce better or more appropriate ALP on the facts of the case. Accordingly, we reject the contentions of the Ld. DR and also the observations of the AO and the Ld. CIT(A) that the assessee cannot resort to adoption of RPM method instead of TNMM." 10.3. The case of the assessee is much better than the case of M/s Mattel Toys (1) Pvt. Ltd. (supra) for the reason that t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er processing." (iii) In the case of Danisco (India) Pvt. Ltd. vs. ACIT, Circle 10(1), New Delhi (ITA no.5291/Del/2010), it is held as follows: "22. Considering the above submissions we find that the assessee established in 1998 as a 100% subsidiary of Danisco A/S Denmark. Danisco India is engaged in the business of manufacturing and trading of food additives. The manufacturing business in respect of food flavours and the trading business is for products for falling under the category of food ingredients. The main grievances of the assessee against the order of the Ld. TPO upheld by the Ld. DRP are regarding their approach in the manner in which transfer pricing adjustment has been made, the approach adopted by the Ld. TPO in granting 17 comparable companies denying the economic adjustment claim made by the assessee, regarding computation of margins of the assessee, non consideration of supplementary transaction and denial of adequate opportunity of being heard to the assessee by the authorities below as well as their failure to examine the contentions and arguments of the assessee in this regard. Considering these grievances as discussed herein above by us in the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....imilar circumstances, Mumbia Bench of the Tribunal in the case of L'Oreal India Pvt. Ltd. (supra) has taken the view that the RPM would be the most appropriate method for determining the ALP. The Mumbai Bench of Tribunal in this regard, has referred to the OECD guidelines wherein a view has been expressed that RPM would be the best method when a re-sale takes place without any value addition to a product. In the present case, the assessee buys products from the AE and sells it without any value addition to the Indian customers. In such circumstances, we are of the view that the ratio laid down by the Mumbai Bench of the Tribunal in the case of L 'Oreal India Pvt. Ltd. (supra) would be squarely applicable to the facts of the assessee's case. In that event, the GP as a percentage of sales arrived at by the TPO in Annexure to the TPO's order insofar as trading activity of comparables identified by the TPO at 12.90%. The GP as a percentage of sales of the assessee is at 35.6% which is much above the percentage of comparables identified by the TPO. In such circumstances, we are of the view that no adjustment could be made by way of ALP. We, therefore, accept the alternat....