TaxTMI 
TaxTMI 
2026 (4) TMI 1486
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....Ld. AO be directed to accept the returned income 2. On the facts and circumstance of the case, the Ld. AO/ the Learned DC/ ACIT TP Delhi 2(2)(1) ('Ld. TPO') erred in making a Transfer Pricing (TP) adjustment of Rs. 4,50,32,314 on account of incorrect computation of working capital adjustment while passing the order to give effect to the Learned Dispute Resolution Panel's ('Ld. DRP') directions. The Appellant prays that the Ld. AO/Ld. TPO be directed to correctly compute the working capital adjustment as per Ld. DRP's directions. 3. Without prejudice, on the facts and circumstances of the case and in law, the Ld. AO/Ld. TPO has erred in: * adopting different treatment of various items as operating/non-operating in nature for computing the operating margin for the tested party (Appellant) and for the comparables, and thereby not following a consistent approach. The Appellant prays that the Ld. AO/ Ld. TPO be directed to accept the treatment of items as operating/non-operating as considered by the Appellant in the TP Study and also accepted by the Ld. TPO at the time of passing the TP order, and thereby follow the co....
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....the case and in law, the Ld. DRP has erred in upholding the action of the Ld. AO/Ld. TPO in not granting risk adjustment to the profit Level Indicator ('PLI') of comparable companies as required by Rule 10B(3) read with Rule 10B(1)(e) of Income-tax Rules, 1962 ('the Rules'). 9. On the facts and in the circumstances of the case and in law, the Ld. AO has erred in initiating penalty proceedings under section 270A of the Act. The Appellant prays that the Ld. AO be directed to drop the penalty proceedings under section 270A of the Act. 3. The Ld. Counsel for the assessee at the outset submitted that identical issues came up for consideration before the Tribunal in assessee's own case in the immediately preceding assessment year i.e. A.Y. 2020-21 in ITA No.4400/Del/2024 dated 24.10.2025 and the Tribunal considering the submissions evidences placed on record held that trading segment of the assessee cannot be carved out since trading segment is inextricably linked to integrated business model of the assessee and accepted the transactional net margin method (TNMM) adopted by Assessee at entity level. 4. The Ld. Counsel for the assessee submits that ....
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....ia Private Limited is engaged in the business of distribution, sales, marketing and customer support services of internet protocol secure networking solutions, equipment and software. The assessee imports networking equipment from an overseas entity and further is engaged in distribution, sales, marketing, customer support services of internet protocol secured networking solutions, equipment and software embedded in such imported equipment. The Company is a Limited Risk Distributor for its Associated Enterprise viz. Juniper Networks International BV (JNIBV). It imports networking equipments and related spares/ consumables from JNIBV for onward selling either in the Indian Market or other countries through Merchant Trading Transactions. 3. The Company was incorporated on 11th December 2017 as a Limited Risk Distributor for Juniper Networks International BV (JNI BV) for the purpose of sale of networking equipment in India. Consequently, the assessee purchases goods (both for the purpose of distribution and as spares) for onwards distribution to third party customers. Additionally, through Merchant Trading Transactions, the Company also undertook Merchant Trading Transactions....
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....est income under effective interest method on loans/security deposit 0.21 Operating Revenue (Sales)(A) 362.75 219.18 Expenses : Cost of spares and components consumed 72.7 Purchase of traded goods 174.69 174.69 (Increase)decrease in inventories of traded goods -4.34 -4.34 Employee benefit expenses (allocated based on revenue from operations 58.54 35.4 Depreciation expenses 4.32 4.32 Interest on lease liabilities 1.27 Other expenses (allocated based on revenue from operations) 44.71 27.03 Operating expenses (B) 351.89 237.1 Operating profit (C = A - B) 10.86 -17.92 Operating profit/sales (D = C/a) -8.18% 7. We observed that in the above chart, the TPO has split the income and expenses on the basis of trading segment and allocated the cost on the basis of revenue from operation (particularly employee cost and other expenses). He determined the OP/Sales at -8.18%. He observed that the assessee is incurring losses in its trading segment which is basically based on purchases and supply from its ....
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....Appellant prays that the Ld. AO be directed to accept the returned income. 2. On the facts and circumstance of the case, the Ld. AO erred in making an adjustment of Rs.16,86,93,204 on account of TP adjustment without appreciating the fact that the aforesaid adjustment has been deleted by the Learned DC/ACIT TP Delhi 2(2)(1) ('Ld. TPO') in the order passed to give effect to the Dispute Resolution Panel (,DRP') directions. The Appellant prays that the Ld. AO be directed to delete the adjustment of Rs.16,86,93,204. 3. On the facts and circumstances of the case and in law, for determination of arm's length price ('ALP'), the Ld. DRP erred in upholding action of Ld. Assessing Officer/ Ld. TPO in carving out alleged trading segment by not accepting the inextricably linked i.e., integrated business model of the Appellant and rejecting the application of Transactional Net margin Method (TNMM') at entity level. The Appellant prays that the Ld. Assessing Officer/ Ld. TPO be directed to accept the inextricably linked business model of the Appellant and also accept application of TNMM at entity level. 4. Without prejudice....
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....e they have clearly recorded the FAR analysis. Further he brought to our notice the TP study submitted by the assessee, which is placed at pages 23 to 34 of the paper book. With reference to above material on record, he submitted that the lower authorities have recorded the nature of service segment, the assessee provides after sale services in the form of AMC through its own employees. After recording the same, they observed that these are two legs of transactions form separate class of transactions involve different levels of risk involved. He brought to our notice the observations of the DRP that under TP regulations, the bench marking should be done on transaction to transaction basis unless the transactions are so closely inter-linked and continuous that separate evaluation of the same is not possible. Whereas in the given case, the same are fundamentally different, it can be segregated. Therefore, he sustained the findings of TPO and ld. DRP also rejected all other objections raised by the assessee. 11. He further brought to our notice agreement placed at page 578 of the paper book. He submitted that as per the above agreement and recital, the assessee wishes to mark....
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....isting in the definition of key performance indicators for the network and services); and (e) such other services provided by JNSIPL to the Customer." 14. Further as per the software and service agreement, the assessee is mainly engaged in marketing and customer service as per the mutual agreements which include the warranty extended on the product. 15. We observed that considering the fact that the assessee is involved in the trading of the products supplied by the AEs and also having service facility, the tax authorities divided the business of the assessee in two segments and reworked the segmental results by allocation on the basis of revenue factor. In our view, they have completely overlooked the fact that the core business is trading and the customer services are interconnected to it. Most of customer services are provided with the assistance of AEs. In case the trading results has to be bench marked when the trading is complete as soon as the products are sold to the Indian customers whereas it is inter connected with the after sales customer services as defined in the clause of 1.4 of the mutual agreement. Merely because the assessee has facility....
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....ance updates are crucial to the continued functionality of the software. Determine the transaction price: The transaction price for the Company's contracts with its customers consists of both fixed and variable consideration provided it is probable that a significant reversal of revenue will not occur when the uncertainty related to variable consideration is resolved. Fixed consideration includes amounts to be contractually billed to the customer while variable consideration includes estimates for rights of return, rebates, and price protection. which are based on historical sales returns and price protection credits, specific criteria outlined in rebate agreements, and other factors known at the time. The Company generally invoices customers for hardware, software licenses and related maintenance arrangements at time of delivery. and professional services either up front or upon meeting certain milestones. Customer invoices are generally due within 30 to 90 days after issuance. The Company's contracts with customers typically do not include significant financing components as the period between the transfer of performance obligations and timing of payment are gene....