2023 (2) TMI 405 - AT - Income Tax

TP Adjustment - selection of MAM Most Appropriate Method - RPM v/s TNMM - assessee adopted resale price method, but the transactional net margin method adopted by the TPO - assessee manufacturers and sale products and also provision of designing and technical support in that field engaging itself in providing customized products and services tailored to meet the specific need of customers in different market - HELD THAT - We find that co-ordinate bench in 2022 (12) TMI 670 - ITAT MUMBAI as per order dated 22.07.2022 relying on the decision of the Hon ble Bombay High Court 2015 (2) TMI 407 - BOMBAY HIGH COURT held that in assessee s case the Resale Price Method is the most appropriate method for benchmarking international transaction in trading segment of import of finished good - Decided in favour of assessee.

Summary

Issues involved:
Transfer pricing adjustment on international transaction of import of finished goods, Selection of the most appropriate transfer pricing method, Application of Resale Price Method vs. Transactional Net Margin Method.

Detailed Analysis:

Transfer Pricing Adjustment:
The appeal was filed against the assessment order that made a transfer pricing adjustment of INR 99,31,763 on the import of finished goods. The dispute arose from the rejection of the resale price method chosen by the assessee in favor of the transactional net margin method selected by the Transfer Pricing Officer (TPO). The TPO's decision led to the adjustment, which was contested by the assessee.

Selection of Transfer Pricing Method:
The key issue revolved around the selection of the most appropriate transfer pricing method. The TPO insisted on using the transactional net margin method based on the approach taken for the previous assessment year. However, the assessee argued for the acceptance of the resale price method, emphasizing that no value addition was made to the imported goods before resale. The dispute resolution panel supported the TPO's decision, leading to the rejection of the resale price method.

Resale Price Method vs. Transactional Net Margin Method:
The crux of the matter was whether the Resale Price Method or the Transactional Net Margin Method should be applied for benchmarking the international transaction of importing finished goods. The tribunal referred to a previous case involving the same assessee and concluded that the Resale Price Method was appropriate for the trading segment of importing finished goods. The tribunal highlighted that the assessee did not undertake any value addition to the imported goods, making the Resale Price Method more suitable. The tribunal disagreed with the DRP's reasoning and upheld the use of the Resale Price Method, directing the deletion of the adjustment made by the TPO.

Conclusion:
The tribunal, based on the precedent and the specific circumstances of the case, allowed the appeal of the assessee, emphasizing the suitability of the Resale Price Method over the Transactional Net Margin Method for benchmarking the international transaction of importing finished goods. The decision was in line with the earlier ruling in the assessee's case for the previous assessment year, providing relief to the assessee in this instance as well.