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2021 (6) TMI 245 - AT - Income TaxTP Adjustment - selection of MAM - rejecting Resale Price method - adjustment for the transaction pertaining to export of socks - assessee applied RPM as the most appropriate method to benchmark its international transactions of export of socks to AEs - contention of the assessee is that the assessee has been consistently adopting RPM as the most appropriate method to benchmark ALP of transactions with AEs - HELD THAT - In the instant case, the Revenue has not brought on record any material fact to show difference in the nature or manner of transactions with AEs. Thus we find no cogent reason to reject assessee's RPM as the most appropriate method to benchmark ALP in the impugned assessment year, when the same was accepted in the earlier and later assessment years by the TPO. The assessee succeeds on rule of consistency. The ground no. 1 of CO is thus, allowed. DRP deleted Adjustment after recording finding of fact that the sale price of goods exported by the assessee to AE is more than or equal to the sale price of goods charged by AE from third parties - DRP recorded this finding on the basis of documents submitted by the assessee and the report of TPO on same. The assessee could reconcile price of 80% of the goods exported to AE vis-a-vis the price charged by AE from third parties. The Department has not been able to controvert factual findings of the DRP based on the report of TPO. Under such circumstances, no adjustment is warranted. We find no infirmity in the impugned findings of DRP. The appeal of Revenue is devoid of merit, hence, dismissed.
Issues involved:
1. Dispute regarding rejection of TNMM method and adjustment for export of socks by the Dispute Resolution Panel. 2. Applicability of Resale Price method and Cost plus method as appropriate methods for determining Arm's Length Price. 3. Consistency in applying the most appropriate method for benchmarking international transactions. 4. Reconciliation of prices for goods exported to Associated Enterprises compared to prices charged from third parties. Analysis: Issue 1: Dispute over TNMM method rejection and adjustment: The appeal by the Revenue challenges the assessment order for the assessment year 2009-10, particularly the rejection of the TNMM method by the Dispute Resolution Panel (DRP) and the consequent deletion of adjustment for the export of socks. The Revenue argued that the DRP erred in accepting the details provided by the assessee without proper justification for rejecting the TNMM method. Issue 2: Applicability of Resale Price method and Cost plus method: The assessee, in the Cross Objections (CO), contended that the Resale Price method (RPM) should have been accepted as the most appropriate method for determining Arm's Length Price (ALP). The assessee also raised the argument for the Cost plus method. The Transfer Pricing Officer (TPO) had rejected RPM and applied TNMM, resulting in a significant adjustment in the ALP. Issue 3: Consistency in applying the most appropriate method: The assessee emphasized the importance of consistency in applying the most appropriate method for benchmarking international transactions. The assessee provided a detailed history of consistently using RPM in previous and subsequent assessment years, which was accepted by the TPO. The argument focused on the lack of material change in transactions warranting a deviation from the settled view. Issue 4: Reconciliation of prices for goods exported to Associated Enterprises: The DRP deleted the adjustment after finding that the prices of goods exported by the assessee to Associated Enterprises were equal to or higher than the prices charged from third parties. The assessee successfully reconciled 80% of the prices, which the Department failed to challenge effectively. The factual findings of the DRP based on the TPO report remained uncontroverted. In conclusion, the Tribunal dismissed the Revenue's appeal and partly allowed the Cross Objections of the assessee. The decision was based on the lack of justification for rejecting the RPM method, the importance of consistency in applying the most appropriate method, and the successful reconciliation of prices for goods exported to Associated Enterprises. The judgment highlighted the significance of factual findings and the need for a coherent and substantiated approach in transfer pricing disputes.
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