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2024 (1) TMI 290 - HC - Income TaxTP Adjustment - Most Appropriate Method (MAM) for determining the Arm s Length Price (ALP) - as per assessee Comparable Uncontrolled Price (CUP) Method should be applied - whether appellant/assessee had recovered from its AE a price higher than that which the AE received from DMRC? - comparables analysis - HELD THAT - The matter is remitted to the CIT(A) for examination of the issues set forth hereafter (i) Whether or not the appellant/assessee recovered from its AE a price higher than that which the AE received from DMRC against the supply of bogies/wagons. (ii) The comparables against which ALP should be benchmarked. (iii) Whether, in the facts and circumstances obtaining in the AY in issue, i.e., AY 2011-12, requires the usage of CUP Method for determining ALP as against TNM Method, as held by this court in its order dated 09.04.2018 passed in ITA No.223/2018. In other words, only if the CIT(A) finds that facts and circumstances subsist which distinguish it from those obtained in AY 2010-11, would he adopt a method different from the TNM method.
Issues involved: Determination of Arm's Length Price (ALP) using Comparable Uncontrolled Price (CUP) Method or Transactional Net Margin (TNM) Method, and whether the appellant recovered an excess price from its Associated Enterprise (AE) in supplying bogies/wagons.
The judgment addressed two main issues raised by the appellant. Firstly, the method to determine the Arm's Length Price (ALP) was contested between the Comparable Uncontrolled Price (CUP) Method advocated by the appellant and the Transactional Net Margin (TNM) Method favored by the revenue. The second issue involved the factual inquiry into whether the appellant overcharged its AE for supplying bogies/wagons compared to the price received from the third party, Delhi Metro Rail Corporation (DMRC). Regarding the first issue, the Tribunal had previously rejected the CUP method, which the appellant challenged. The Tribunal's decision was influenced by a previous order concerning AY 2010-11. The appellant argued that if the price charged to DMRC was the same as that charged to the AE, the method of determination would become irrelevant. The Tribunal was bound by the earlier decision and dismissed certain grounds of the appeal. On the second issue, the appellant contended that the price charged to the AE was passed on to DMRC, and therefore, no excess amount was recovered. The Tribunal remitted this issue to the Commissioner of Income Tax (Appeals) for further consideration. The judgment highlighted the need for the CIT(A) to reexamine both issues: whether the appellant overcharged its AE compared to DMRC and the selection of comparables for determining the ALP. The CIT(A) was directed to consider if the CUP Method should be applied instead of the TNM Method based on the specific circumstances of AY 2011-12, distinct from the previous year's decision. The parties were instructed to comply with the digitally signed copy of the order.
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