2014 (7) TMI 1319 - AT - Income Tax

Addition on account of Arm s Length Price of international transaction - MAM selection - HELD THAT - Finding of the CIT(A) that on the peculiar facts and circumstances of the case TNMM is the most appropriate method deserves to be upheld as the same is in consistency of the finding of the Tribunal in assessee s own case for the immediately preceding assessment year 2011 (7) TMI 1364 - ITAT DELHI . However the CO-ordinate Bench had restored the issue to verify the calculation as they had not been vetted either by the AO or by the CIT(A). In the facts of the present case the exercise has been done by the CIT(A) against which the Revenue is in appeal before us on the afore-mentioned ground. We have taken ourselves through the findings arrived at in impugned order which has been extracted in the earlier part of this order. On a consideration thereof and in the absence of any argument pointing to an incorrect fact, circumstance or position of law so as to come to a contrary view we find no good reason to interfere with the finding arrived at in the impugned order. Being satisfied with the reasoning and finding arrived at therein the departmental ground is dismissed.

Summary

Issues Involved:

1. Deletion of addition on account of Arm's Length Price (ALP) of international transactions by the CIT(A).

Issue-Wise Detailed Analysis:

1. Deletion of Addition on Account of Arm's Length Price (ALP):

The Revenue filed an appeal against the CIT(A)'s order dated 28.01.2013, which pertained to the 2007-08 assessment year. The primary issue was whether the CIT(A) was justified in deleting the addition of Rs. 1,53,03,888/- on account of ALP of international transactions made by the Assessing Officer (AO)/Transfer Pricing Officer (TPO).

The assessee, a 100% subsidiary of Destination of the World Holding Establishment, Liechtenstein, engaged in rendering inbound, outbound, and domestic travel services, filed a return declaring a loss of Rs. 2,80,58,787/-. The case was selected for scrutiny, and the international transactions undertaken by the assessee were analyzed. The assessee applied the Resale Price Method (RPM) and Cost Plus Method (CPM) as the most appropriate methods for determining the ALP, claiming that the transactions were at arm's length.

The TPO, however, did not accept the assessee's claim, arguing that the segmental information provided was unreliable and the transfer pricing report lacked proper risk analysis. The TPO applied the Transactional Net Margin Method (TNMM) at the entity level, using external comparables, and concluded that the ALP was not correctly determined by the assessee.

Aggrieved, the assessee appealed to the CIT(A), who deleted the addition made by the TPO, relying on the Tribunal's decision in the assessee's own case for the previous assessment year (2006-07). The CIT(A) found that the internal TNMM should be used, and the segmental accounts presented by the assessee were valid. The CIT(A) examined the segmental results and concluded that the international transactions were at arm's length.

The Revenue, dissatisfied with the CIT(A)'s decision, appealed to the Tribunal. The Tribunal reviewed the material on record and the previous year's Tribunal decision, which supported the use of internal TNMM. The Tribunal upheld the CIT(A)'s finding that TNMM was the most appropriate method and that the segmental accounts prepared by the assessee were reliable. The Tribunal dismissed the Revenue's appeal, finding no reason to interfere with the CIT(A)'s decision.

In conclusion, the Tribunal found that the CIT(A) was justified in deleting the addition on account of ALP, as the internal TNMM was the most appropriate method, and the segmental accounts were valid and reliable. The appeal of the Revenue was dismissed, and the order was pronounced in the open court on 31st July 2014.