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2020 (7) TMI 660 - AT - Income TaxTP Adjustment - selection of MAM - TNMM or CUP method - HELD THAT - Assessee s consistent TNMM methodology has been rejected by Ld. TPO without any sound basis. Although the principle of res-judicate are not applicable to Income Tax proceedings, however, the rule of consistency would debar the revenue to change its stand in difference assessment years without any sound basis, facts and circumstances being identical. The said proposition is well supported by the decision of PCIT v/s. Quest Investment Advisors Pvt. Ltd. 2018 (7) TMI 479 - BOMBAY HIGH COURT wherein it has been held that when a principle has been accepted by the Revenue in earlier years as well as in subsequent years then the Revenue is bound by it unless there is a change in law or change in facts therein, which change has to be pointed out in the assessment Order. As application of TNMM method has been accepted by the Tribunal for AYs 2005-06 to 2007-08 and no change in facts or circumstances has been demonstrated before us for this year. Therefore, following the rule of consistency and the cited order of Tribunal in assessee s own case, we hold that TNMM methodology as adopted by the assessee to benchmark the transactions was to be accepted. Since, the margin of the assessee under this method have been shown to be within ALP range, the impugned adjustment stand deleted.
Issues Involved:
1. Transfer Pricing Adjustments 2. Levy of Interest under Sections 234B, 234C, and 234D 3. Levy of Penalty under Section 271(1)(c) 4. Addition of Interest Income on Fixed Deposits Detailed Analysis: 1. Transfer Pricing Adjustments: The primary issue in these appeals pertains to the Transfer Pricing (TP) adjustments made by the Assessing Officer (AO) for the Assessment Years (AY) 2009-10, 2010-11, and 2012-13. The AO, following the directions of the Dispute Resolution Panel (DRP), made adjustments to the assessee's income based on the Transfer Pricing Officer's (TPO) findings. The TPO rejected the Transactional Net Margin Method (TNMM) used by the assessee for benchmarking international transactions and instead applied the Comparable Uncontrolled Price (CUP) method. The assessee contested this adjustment, arguing that the TNMM method had been consistently accepted in previous and subsequent years and that the CUP method was not appropriate due to differences in volume, geography, and other factors. The Tribunal found that the facts for AY 2009-10 were similar to those in earlier years where the TNMM method had been accepted. The Tribunal emphasized the rule of consistency, citing the Bombay High Court's decision in PCIT v/s. Quest Investment Advisors Pvt. Ltd., which held that the Revenue must follow a consistent approach unless there is a change in law or facts. Consequently, the Tribunal upheld the use of the TNMM method and deleted the TP adjustments of ?347.41 Lacs for AY 2009-10, ?229.00 Lacs for AY 2010-11, and ?491.43 Lacs for AY 2012-13. 2. Levy of Interest under Sections 234B, 234C, and 234D: The assessee also contested the levy of interest under Sections 234B, 234C, and 234D. The Tribunal directed the AO to compute the interest in accordance with the law, thereby addressing the assessee's grievance on this issue. 3. Levy of Penalty under Section 271(1)(c): The AO had proposed the initiation of penalty proceedings under Section 271(1)(c) of the Income Tax Act. The Tribunal did not provide a detailed analysis of this issue in the judgment, indicating that it was not a primary focus of the appeals. 4. Addition of Interest Income on Fixed Deposits: For AY 2010-11, the assessee contested the addition of ?19.93 Lacs as interest income on fixed deposits, arguing that the interest was already offered to tax in the subsequent year (AY 2011-12) due to the tenure of the fixed deposits spanning two financial years. The Tribunal found that the AO had already granted relief for the excess interest income in AY 2012-13, confirming that the addition for AY 2010-11 was appropriate. The credit of TDS was to be granted as per law. Conclusion: The appeals were partly allowed, with the Tribunal deleting the TP adjustments for the relevant assessment years and directing the AO to compute interest and grant TDS credit in accordance with the law. The consistent application of the TNMM method was upheld, and the rule of consistency was emphasized in the Tribunal's decision.
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