2018 (10) TMI 1981 - AT - Income Tax

TP Adjustment - adoption of appropriate method for determining the ALP of international transactions - assessee had adopted CPM method as the most appropriate method for determination of PLI by GP/OC - HELD THAT - We observe that the business model of the assessee is same as in the preceding and succeeding years. The facts are unchanged. It is clear from the Paper book submitted by the assessee that for the assessment year 2010- 11 and 2013-14, the cost plus method has been accepted by the Revenue in the same facts of the case of the assessee. This has not been controverted by the ld. DR. We, therefore, find that rule of consistency should have been adopted by the authorities below as held in the case of Racold Thermo Ltd. 2015 (10) TMI 1747 - ITAT PUNE The decision rendered in Fritidsresor Tours and Travels India P. Ltd 2015 (11) TMI 1884 - ITAT DELHI is also applicable to the present case, as in that case, the assessee was engaged in the same line of business and CPM has been accepted by the Co-ordinate Bench of Tribunal, as most appropriate method, as reproduced above. Respectfully following the above decisions, we allow the appeal of the assessee.

Summary

Issues:
Adoption of appropriate method for determining the ALP of international transactions.

Analysis:
The appeal involved a dispute regarding the adoption of the most appropriate method for determining the Arm's Length Price (ALP) of international transactions. The assessee had filed the return of income declaring a loss and had undertaken international transactions. The Transfer Pricing Officer (TPO) did not accept the Cost Plus Method (CPM) used by the assessee and applied Transactional Net Margin Method (TNMM) as the most appropriate method. The TPO made an upward adjustment based on selected comparables with an average PLI of 4.45%. The Dispute Resolution Panel (DRP) and the Assessing Officer upheld the TPO's order, leading to an upward adjustment of Rs. 3,01,29,754. The assessee contended that the TPO wrongly rejected the CPM, which had been accepted in preceding and succeeding years. The assessee relied on various case laws supporting the consistency in methodology for benchmarking international transactions.

The appellate tribunal analyzed the facts and legal precedents presented by both parties. It observed that the business model of the assessee remained consistent in preceding and succeeding years, and the Revenue had accepted the CPM method in those years. The tribunal emphasized the principle of consistency in tax proceedings and cited relevant case laws to support its decision. It concluded that the authorities should have maintained consistency in methodology and allowed the appeal of the assessee based on the principle of consistency and legal precedents. Consequently, the appeal was allowed, and the order was pronounced in favor of the assessee on 24th October 2018.