TaxTMI 
TaxTMI 
2025 (4) TMI 1933
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.... Adjustment relating to transaction of sale of goods 2. That on facts and circumstances of the case and in law, the AO/ DRP/Transfer Pricing Officer ("TPO") have erred in making Transfer Pricing adjustment amounting to INR 9,15,68,139 in respect of the international transactions relating to sale of goods. 3. That on facts and circumstances of the case and in law, the AO/DRP/TPO have grossly erred in rejecting the benchmarking approach and the Most Appropriate Method ("MAM") i.e., Other Method adopted by the Appellant in relation to sale of goods transaction, without providing any cogent reasoning and thereby benchmarking the said transaction on incorrect basis: 3.1. Erred in rejecting the most appropriate method selected by the Appellant to benchmark the said transaction and substituting with its own methodology for the purpose of making adjustment without appreciating and understanding functional profile and precise nature of Appellant's business; 3.2. Erred in not appreciating and accepting the documents maintained by the Appellant in support of the arm's length price of the international transactions, despite the fact that the document....
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....vp. Organization Pvt. Ltd., Vanta Bioscience Ltd., Veeda Clinical Research Ltd., Jubilant Biosys Ltd., Q P S Bioserve India Pvt. Ltd. and Ross Lifescience Ltd. 6. Without prejudice to the above grounds, the AO/ DRP/TPO have erred in arbitrarily rejecting additional functionally comparable companies identified and filed before the DRP without passing a speaking order. 7. Without prejudice to the above grounds, the AO / DRP / TPO have erred in not providing for economic adjustment to account for differences in production capacity levels of the Appellant vis-à-vis comparable companies while computing the margins of the Appellant / comparable companies. Adjustment relating to Notional Interest on Trade Receivables 8. That on the facts and in the circumstances of the case and in law, the AO / DRP / TPO have erred in framing an adjustment on account of notional income of INR 23,597 on the ground that outstanding trade receivables is a separate international transaction and does not satisfy the arm's length principle envisaged under the Act. 8.1. That on the facts and in the circumstances of the case and in law, the AO / DRP / TPO ha....
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....Ground nos.3 to 7 of the assessee are related to adjustment made by the Ld. AO/Ld. TPO on account of sale of goods of Rs. 9,15,68,139/-. The Ld. AR submitted that, the assessee is engaged in trading of diagnostic kits and adopted the Comparable Uncontrolled Price ("CUP") as Most Appropriate Method ("MAM") for determining the Arm's Length Price ("ALP"). However, the Ld. TPO rejected the method adopted by the assessee and adopted the Transaction Net Margin Method ("TNMM") as MAM. The Ld. AR further submitted that, the Ld. TPO selected the comparables that do not match with the functions of the assessees. In support of their submission, the Ld. AR invited our attention to para nos.2 & 7 of the order of Ld. TPO and submitted that Ld. TPO has selected the company having R & D services, R&D Centre for bio medical and radiology research, R & D in natural science, etc. Accordingly, the Ld. AR objected that, as the assessee is engaged in trading and not in R&D activity, which makes the selection of comparable inappropriate. The Ld. AR also invited our attention to para nos.4.2 & 5 of the order of Ld. TPO wherein the Ld. TPO has mentioned that the assessee has not submitted Transfer Pricing ....
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....er, the assets employed and the risks taken and the results of the search is given in the succeeding paragraphs." 8. On perusal of above, we found that Ld. TPO has specifically stated that the assessee has not filed TP documentation. Therefore, it is abundantly clear that the Ld. AO/Ld. TPO has passed his order without considering the TP documentation filed by the assessee. Accordingly, without going into the objections with regards to the functionality, we set aside this issue to the file of Ld. AO/Ld. TPO for fresh adjudication as per law. Accordingly, the ground nos.3 to 7 of the assessee are allowed for statistical purposes. 9. Ground no.8 of the assessee is related to adjustment of Rs. 23,597/- made by the Ld. AO/Ld. TPO on account of interest on trade receivables. In this regard, the Ld. AR invited our attention to page no.207 of the paper book and submitted that, the assessee has trade payables of Rs. 16,40,511/- due to its Associated Enterprises ("AEs"). However, the assessee does not charge any interest on such trade payables. If the rate of interest applied by the Ld. TPO is applied on trade payables, then the interest payable to AEs would exceed the interest receiv....