AI Drafter 
TaxTMI 
TaxTMI 
2026 (4) TMI 1779
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.... 1. That on the facts and in the circumstances of the case and in law, the Ld. AO erred in completing the assessment of the Appellant at assessed income of INR 9,89,66,140 as against returned income of INR 7,20,03,480. 2. That on the facts and in the circumstances of the case and in law, the reference made by the Ld. AO to the Transfer Pricing Officer ('TPO') under section 92CA of the Act is void ab initio and is bad in law, as the Ld. AO has not recorded any reasons in the order passed under section 143(3) of the Act read with section 144C of the Act, based on which the Ld. AO concluded that it was 'expedient and necessary' to refer the matter to the TPO for computation of Arm's Length Price ('ALP'), as is required under section 92CA(1) of the Act. 3. That on the facts and in the circumstances of the case and in law, the Ld. AO / Dispute Resolution Panel ('DRP') / TPO erred in making transfer pricing adjustment to the Arm's Length Price ('ALP') of international transactions of the Appellant amounting to INR 2,38,20,335. 4. That the ld. AO / DRP / TPO erred on facts and in law in the assessment of the ALP of the Appellant's international transactions, i....
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....ature hence dismissed.This leaves us only with ground No. 4 of the appeal which is contesting the adjustment of the transfer pricing amounting to Rs. 2,38,20,335/-. 4. The brief facts of the case show that assessee company is engaged in the business of importing hearing aids, instruments from its associated entities and distributes the same in the domestic market after caring out minor customization. The assessee filed its return of income on 31st December 2020 at a total income of Rs. 7,20,03,480/-. As the assessee has entered international transaction of import etc., the reference was made to the learned Transfer Pricing Officer for verification of the arm's length price. 5. The assessee benchmarks the above transaction computing its own margin at 3.33% adopting transactional net margin method as the most appropriate method selecting the profit level indicator of operating profit to operating cost putting the keyword of Trading of Hearing Aids, selected 11 comparable companies and held that its international transactions are at arm's length. 6. The learned TPO verified the TPSR and found that there are inappropriate filters, he carried out the fresh search putting the ke....
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....t services mainly whereas the assessee is purely a distributor. The support service provider would naturally have the better margins compared to the limited distributor like the assessee. He further referred to the website of their comparable companies and submitted that it is engaged into the trading products of hospital theatre and lightings whereas the assessee is purely a product distributor of hearing aids. He further referred to the page No. 280 of the paper book wherein on 28th June 2023 these reasons wereshown to the learned Transfer Pricing Officer which were rejected. 11. The learned CIT DR vehemently submitted that MDD Medical Services Pvt. Ltd. is held to be functionally comparable by the learned Dispute Resolution Panel therefore she supported strongly the direction of the learned DRP. 12. With respect to the QMS Medical Allied Services Pvt. Ltd. which is the comparable of the learned Transfer Pricing Officer having a margin of 11.55% selected by the learned TPO despite showing the extraordinary events in that company and further the margins of the company were also not correctly computed according to the learned AR the correct margin is 9.75% whereas the TPO has....
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....minal which cannot be used for exclusion of this company. For the purpose of margin she submitted that the same will be verified. 18. Though in the chart submitted before us the assessee has mentioned few other comparables to be excluded however no arguments were advanced and therefore those are not considered. 19. The learned AR further stated that Hicks Thermometer Limited is the comparable selected by the assessee which is engaged in the business of scientific and medical equipment such as thermometer which is comparable with the assessee qualifies all the filters applied by the TPO, did not have any related party transactions despite this the same was not included. 20. With respect to the inclusion of Hicks Thermometer (India) Limited she relied upon the matrix of the TPO where this company was not found and therefore same cannot be included. 21. We have carefully considered the rival contentions and perused the orders of the learned TPO, direction of the learned Dispute Resolution Panel as well as the submissions made by the assessee and the learned DR. The brief facts of the case shows that Sivantos India Private Limited entered into a supply agreement in relation....
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....e has R&D expenditure however only the accounting policy with respect to Research and Development was shown which is placed at page No. 986 of the paper book whereas in the annual accounts and in the Director's report no research and development activities are visible. Thus, assessee did not incur any R & D Expenditure as per profit and loss account. In fact, in the Director's report no such expenditure is incurred by the assessee. Even the profit and loss accounts available at page No. 991 also do not show any Research and Development expenses. Accordingly, we find that company was correctly included by the learned AO. 23. With respect to QMS Medical Allied Services Private Limited the annual accounts are perused at Page No. 808 of the paper book. The first contention of the assessee that during the year the assessee company has increased the authorized capital and has also issued the share capital has resulted into an extraordinary event. We find that share capital of the assessee shown at page No. 843 of the paper book there is merely an increase of Rs. 3 crores. Merely an introduction of fresh capital into the business of the company does not result into any extraordinary ev....