TaxTMI 
TaxTMI 
2026 (6) TMI 1163
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....HE ACT 2. erred in not passing the final assessment order within the time limit prescribed under section 153 of the Act which is the outer time limit for passing the final assessment order and hence, the assessment proceedings is time barred and liable to be quashed VALIDITY OF TRANSFER PRICING PROCEEDINGS AND TRANSFER PRICING ORDER WITHOUT VALID REFERENCE UNDER SECTION 92CA OF THE ACT 3. erred in not appreciating that the reference under section 92CA of the Act is not valid as it is not in accordance with the conditions mentioned in CBDT instruction no. 3/2016 and hence the transfer pricing order passed by the leamed TPO is bad in law and requires to be quashed 4. erred in not providing an opportunity of being heard to the Appellant before referring the matter to the learned TPO as per CBDT instruction no 3/2016 VALIDITY OF ASSESSMENT PROCEEDINGS CONCLUDED BASED ON TRANSFER PRICING ORDER PASSED PURSUANT TO INVALID REFERENCE 5. erred in issuing the draft assessment order dated 27 September 2023 as per provisions of Section 144C of the Act, without appreciating the fact that the transfer pricing order passed on 14 March 2023 base....
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....perating profit margin for the purpose of determination of the ALP in the case of the following companies: • Kox Med & Labs Private Ltd • Sandor Medicaids Pvt. Ltd. • Hicks Thermometer (India) Ltd. • Schiller Healthcare India Pvt. Ltd. Rejection of Comparable failing RPT filter 12 Without prejudice to the above, erred in considering following entities as comparable while computing arm's length price of international transaction of purchase of healthcare products from AEs for resale, without considering substantial related party transaction filter and ignoring submissions filed by the Appellant on computation of RPT filter basis financial statements of following entities: • Chesa Dental Care Services Limited • QMS Medical Allied Services Limited SHORT GRANT OF TAXES DEDUCTED AT SOURCE ('TDS') 13. erred in granting short credit for TDS amounting to INR 7,314 without giving any findings/ reasons for not allowing the same: LEVY OF INTEREST UNDER SECTION 234A OF THE ACT 14. erred in charging interest amounting to INR 12,60,607 under section 234A....
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....om AEs 68,45,181 Other Method Cost-to-cost basis (no mark-up) 4.1. Further, case of the assessee was referred to ld. TPO for computation of the arm's length price (ALP) for which order u/s. 92CA(3) was passed on 14.03.2023, making an upward transfer pricing adjustment of Rs. 2,09,48,438/- in respect of international transaction of purchase of healthcare products for resale. For the transaction of purchase of healthcare products for resale in India, assessee in its transfer pricing study report (TPSR) had adopted Transactional Net Margin Method ('TNMM') as Most Appropriate Method ('MAM') and considered Operating Profit ('OP')/ Operating Revenue ('OR') as Profit Level Indicator (PLI) while treating itself as the tested party to determine the ALP. The following comparable companies were selected by the assessee for which summary of weighted average margin are as follows: Sr. No. Name Weighted average of adjusted OP/OR (%) for FY 2017-18 to FY 2019-20 1. Pika Medical Private Limited -2.78% 2. Schiller Healthcare India Private Limited -1.57% 3. Sandor Medicaids Private Limited 0.47% 4. Suyog Diagno....
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....5 35th Percentile 5.82% Average of 7 & 8 Median 7.07% 9 65th Percentile 9.26% 4.3. Accordingly, ld. TPO proposed an arm's length price adjustment on aforesaid transaction by considering arm's length OP/OR margin at median 7.07%, computation for which is tabulated below: Particulars Reference Amount (INR) Assessee's operating margins (OP/OR) A 4.10% ALP Margins determined by learned TPO (OP/OR) B 7.07% Actual Operating revenue of the assessee C 407,23,38,000 Arm's length profit of the assessee determined by learned TPO D=C*B% 28,79,14 296 Actual operating profit of the assessee E=C*A% 16,69,65,858 ALP Adjustment F=E-D 12,09,48,438 4.4. Aggrieved, assessee raised its objections before the ld. DRP, who vide its directions dated 25.06.2024 upheld the ld. TPO's approach and rejected the grounds taken by the assessee. 5. In relation to ground no. 10, ld. Counsel for the assessee argued only in respect of IDS Denmed Private Limited, contending that it is not an appropriate comparable for the impugned benchmarking. In this respect, ld. Counsel fo....
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....ion Yes No 5.3. For the risks analysis, as already noted, assessee is a limited risk distributor. The risk profile of the assessee with that of its AEs is summarized as below: Type of Functions CHIPL (assessee) AES Business / market risk Limited Yes Inventory risk Limited No Product liability risk No Yes Credit and collection risk Limited No Foreign exchange risk Yes No Scheduling risk Limited Yes 5.4. Details of tangible assets employed after depreciation by assessee for the year under consideration are as follows: Assets Amount (INR in Lakhs) Computers 417.11 Office Equipment 188.01 Total 605.12 6. Keeping the above FAR analysis of the assessee in perspective, we now look into the same for the comparable company IDS Denmed Private Limited. In this respect, from the annual report of the comparable company, it is noted that it is a manufacturer of surgical instruments with no other segmental bifurcation. Relevant extract of the annual report in this respect is reproduced as under: PRINCIPAL BUSINESS ACTIVITIES OF THE COMPANY All the business activities contributing 10% or mor....
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....ed by the assessee Paper book reference 1 Sandor Medicaids Pvt. Ltd. (Sandor') 5.16% -9.29% Rectified margins provided on page no. 798 of factual Paperbook-Part 1 -Relevant extract financial statements provided on page nos. 799 to 813 of factual Paperbook-Part 1 2 Schiller Healthcare India Pvt. Ltd. (Schiller) 9.26% -5.73% -Rectified margins provided on page no. 814 of factual Paperbook Part 1 -Relevant extract financial statements provided on page nos. 818 to 837 of factual Paperbook-Part 1 3 Kox Med & Labs Private Ltd. ('Kox Med) 4.19% 2.46% Rectified margins provided on page no. 838 of factual Paperbook-Part 1 -Relevant extract financial statements provided on page nos. 839 to 855 of factual Paperbook-Part 1 4 Hicks Thermometer (India) Ltd. (Hicks') 5.94% 5.12% -Rectified margins provided on page no. 856 of factual Paperbook Part 1 -Relevant extract financial statements provided on page nos. 857 to 871 of factual Paperbook-Part 1 8.1. When the correct profit margins are considered as tabulated above, claim of the assessee is that its operating margin falls within the arm's length margin and no adjustme....