TaxTMI 
TaxTMI 
2026 (10) TMI 156
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....law and in facts, by rejecting the detailed response for Show-Cause Notice ("SCN") submitted by the Assessee and issuing a fresh SCN without providing any specific comments or remarks on the detailed submission made. 3. The Hon'ble DRP /Ld. TPO/AO have grossly erred, in law and in facts, by rejecting the economic analysis undertaken in the TP documentation by the Assessee in accordance with the provisions of the Act and undertaking a fresh economic analysis for the determination of the arm's length price in connection with the impugned international transactions thereby holding that the impugned international transactions are not at arm's length. Part II - Objections against rejection of the benchmarking analysis undertaken by the Assessee and the fresh economic analysis undertaken by the Hon'ble DRP /Ld. TPO 4. The Hon'ble DRP /Ld. TPO/ AO have erred in law and facts by rejecting Resale Price Method as the Most Appropriate Method for the transaction of Import of Goods and adopted Transactional Net Margin Method for benchmarking the impugned transaction without appreciating the business model and functional profile of the Assessee. ....
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....ce and customer management, etc. The assessee filed the return of income for AY 2022-23 on 28.09.2022 declaring the total income of Rs. 2,05,33,789/-. The case was selected for scrutiny, and the statutory notices were duly served on the assessee. Since the assessee had international transactions, a reference was made to the Transfer Pricing Officer (TPO) to determine the Arm's Length Price (ALP) of the international transactions the assessee is having with its Associated Enterprises (AE). The TPO proposed the downward adjustment with regard to import of traded goods, purchase of consumables, provision of after sales and support services amounting to Rs. 8,89,39,764/-. The AO passed the draft assessment order incorporating the TP adjustment. Aggrieved, the assessee filed its objections before the DRP who upheld the TP adjustment. The assessee is in appeal before the Tribunal against the final order of assessment passed by the AO as per the directions of the DRP. 3. The assessee in the TP study has benchmarked the international transactions as given below - International transaction Tested Party Most Appropriate Method Profit Level Indicator Tested Party Margin A....
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....l of a simple buy-sell distributor. While the ТРО has accepted that certain expenses such as freight, customs duty, C&F charges, and salaries are consistent with trading activity, the presence of professional charges paid to engineering and technical service providers indicates that the assessee is engaged in activities that extend beyond routine distribution. These professional services, even if claimed to be warranty-related, reflect technical intervention in respect of sophisticated RF products, which cannot be equated with ordinary trading functions. Further, the TP Study itself records that the assessee is involved in after sales support, repair and maintenance, customer management, and design and development activities. The existence of R&D cost recovery arrangements, together with consumables initially identified as R&D-related, supports the finding that the assessee's functions are not limited to mere resale. The assertion that such activities belong exclusively to other segments cannot be accepted when the financials do not clearly segregate these expenses. Before the panel also the assessee could not establish that the assessee involved only in tradi....
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....nover basis which the RPM is rejected as the MAM. The Ld. AR further submitted that the R&D cost recovery was a separate transaction, already benchmarked and accepted by the TPO, and had no bearing on the trading segment. The Ld. AR also submitted that the consumable expenses were ordinary packing costs, and that the TPO had wrongly treated them as R&D lab expenses. The Ld. AR relied heavily on the decision in D Light Energy P. Ltd. (ITAT Delhi, affirmed by the Delhi High Court on 18.03.2025). The Ld. AR submitted that this decision holds RPM to be the MAM for a reseller with no value addition, even where small, allied transactions like warranty claims are aggregated with the main transaction. The Ld. AR further submitted that such minor elements cannot be used to reject RPM in favour of TNMM. The Ld. AR also relied on other judicial precedence in this regard to submit that for the assessee being a trader RPM is the MAM and prayed that the TPO be directed accordingly. 9. We have heard the parties and perused the material on record. The short issue arising for our consideration under Ground No.4 is whether the TPO/DRP were justified in rejecting RPM as the MAM adopted by the asse....
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....e entire trading segment on that ground alone. 11. As regards the recovery of R&D costs, it is submitted that this pertains to a project undertaken for a customer that did not materialize, the costs of which were recovered from the AE and benchmarked as a separate international transaction, the arm's length nature of which the TPO has not disputed. The Ld. AR during the course of hearing submitted that the consumable expenses of Rs.41,28,791 relate to ordinary packing materials used in the course of the trading business and have been erroneously treated by the TPO as relatable to R&D laboratory activity. Neither of these transactions, in our view, has any bearing on the characterization of the trading segment, and both stand outside the ambit of the impugned adjustment. The Hon'ble Delhi High Court, while affirming the decision of the Tribunal in D Light Energy P. Ltd. vs. Assessment Unit (NFAC) (ITA 53/2025 dated 18.03.2025), has held that where goods are purchased from an AE and resold without value addition, RPM remains the MAM, and that minor allied elements aggregated with the principal transaction of purchase and resale do not warrant its rejection in favour of TNM....
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.... the above, the assessee stated that all these expenses are incurred in relation to the trading activity only and no value addition is being made. The argument of the assessee that these expenses are related to trading may be accepted except for professional charges. On perusal of the details of the professional charges, it is observed that the assessee has expenses towards engineering companies such as S K Televentures Engineering Services and Spectra Televentures Pvt Ltd, Aegis Industrial solutions, Reckon Info System Pvt Ltd. which reveals that nature of assessee's business is not just importing and selling to the customers. 3.5 Moreover, in the TP Study also the assessee stated that in addition to trading of telecommunication products, it also provides after sales support services in the nature of repair, maintenance, customer management etc and also undertakes design and development activity. The same is attached for kind reference: 1.Executive summary 1.1 Background Ace Aptanna India Private Limited (Ace indiator zur Company"> [ subglory of SHIN AH Limited which is ultimately held by Ace Technologies Corporation (Ace Korea bi It operates as & distribution aff....