9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (7) TMI 659 - AT - Income TaxTP Adjustment - MAM selection - Comparable Uncontrolled Price ( CUP ) method OR Transactional Net Margin Method ( TNMM ) - rejection of CUP method followed by the assessee and holding the TNMM method as the most appropriate method to benchmark the international transactions with AE's - HELD THAT - We find that the assessee has been following the CUP method for benchmarking the international transactions which is an accepted industry norm in the year under consideration and the same method was also followed by it in earlier years. We find that the Co-ordinate Bench of Tribunal while deciding assessee's appeal for AY 2006-07 2007-08 had on identical facts decided the issue in assessee's favour. Against the order of the Tribunal for AY 2006-07 and AY 2007-08, Revenue had carried the matter before the Hon'ble Delhi Court. The Hon ble High Court 2015 (12) TMI 1513 - DELHI HIGH COURT had dismissed the appeals of the Revenue. We do not find much force in the argument placed by the Revenue. We further find that the aforesaid decision of Hon ble High Court has not been stayed/overruled/set-aside by higher judicial forum. Considering the totality of the aforesaid facts, we are of the view that the ratio of the decision of Hon ble High Court in assessee s own case for A.Y. 2006-07 and 2007-08 would be applicable to the facts of the case in the year under consideration. AO/TPO was not justified in directing the adjustment to the arm s length price. - Decided in favour of assessee. Disallowing setting off of previous years losses claimed by the Assessee in the return of income - HELD THAT - e. In view of the submissions of the Ld AR, we restore the issue to the file of AO. If the contentions of the assessee are found correct by the AO, then the AO is directed to grant set off of previous years losses in accordance with law. Assessee is also directed to furnish the necessary details as called for by the AO.
Issues Involved:
1. Rejection of Comparable Uncontrolled Price (CUP) method. 2. Selection of Transactional Net Margin Method (TNMM) for benchmarking international transactions. 3. Non-submission of relevant documents to the Transfer Pricing Officer (TPO). 4. Set-off of previous years’ losses. Issue-wise Detailed Analysis: 1. Rejection of Comparable Uncontrolled Price (CUP) Method: The primary issue in both assessment years (2010-11 and 2011-12) was the rejection of the CUP method used by the assessee to benchmark its international transactions. The assessee, engaged in international freight forwarding and logistics support services, followed the CUP method, arguing that the 50:50 profit-sharing model with Associated Enterprises (AEs) was an industry norm. The TPO rejected this method, citing incomplete information and the inability to verify the pricing due to non-submission of relevant documents. The TPO instead adopted TNMM, leading to an upward adjustment of the assessee's income. 2. Selection of Transactional Net Margin Method (TNMM): The TPO’s decision to apply TNMM was based on the assertion that the CUP method could not be applied due to the lack of detailed pricing information and agreements. The TPO contended that the CUP method required a high degree of comparability, which was not met in this case. The assessee argued that their 50:50 profit-sharing model with AEs was consistent with transactions involving third parties, thereby justifying the CUP method. However, the TPO maintained that without precise data, CUP could not be reliably applied. 3. Non-submission of Relevant Documents to the TPO: The TPO noted that the assessee failed to provide complete information, such as agreements and detailed pricing data, which hindered the application of the CUP method. The assessee countered that all necessary documents had been submitted and that the 50:50 profit-sharing model was a standard industry practice, as previously accepted by the Tribunal and upheld by the High Court for earlier assessment years (2006-07 and 2007-08). 4. Set-off of Previous Years’ Losses: For the assessment year 2011-12, the assessee raised an additional ground regarding the non-allowance of set-off for previous years' losses. The Tribunal directed the Assessing Officer (AO) to verify the claim and allow the set-off if found correct, in accordance with the law. Judgment: The Tribunal, after considering the submissions and previous rulings, found in favor of the assessee. It noted that the CUP method had been accepted in earlier years and upheld by the High Court. The Tribunal held that the TPO/AO was not justified in rejecting the CUP method and making adjustments based on TNMM. Consequently, the adjustments made by the TPO/AO were deleted. For the set-off of previous years' losses, the Tribunal remanded the issue to the AO for verification and directed that the set-off be allowed if the assessee's claim was found to be correct. Conclusion: The appeals filed by the assessee were allowed, with the Tribunal directing the deletion of the transfer pricing adjustments and remanding the issue of set-off of previous years' losses for verification. The judgment reinforced the acceptance of the CUP method based on industry norms and previous judicial rulings.
|
