9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (10) TMI 1183 - AT - Income TaxTPA - If transactions are both with the AE and Non-AE, whether it is correct to adopt Entity level approach - MAM selection - TNMM application - Held that - Similar issues involved in the present appeal were considered by the Tribunal in assessee s own case 2017 (12) TMI 809 - ITAT DELHI TNMM can be correctly applied on entity level if the international transactions are on sale by the taxpayer to its foreign AE and there is no other international transaction of sale to any outsider and also there is no other international transaction. AO/TPO/DRP have erred in disregarding the segmental result of the taxpayer by proceeding to consider the margin of the taxpayer at the entity level for the transfer pricing analysis. So, by accepting the TNMM as the most appropriate method and in the face of the fact that the taxpayer was having separate international transaction with its AE, the ALP of the same is to be determined whereas ALP of the other transactions of the taxpayer with non-AE is not to be considered. Respectfully, following the findings of the coordinate bench, we direct the TPO to decide the issue afresh after considering the directions of the coordinate bench supra . - Appeal of assessee allowed for statistical purposes.
Issues Involved:
1. Whether it is correct to adopt an entity-level approach when transactions are with both Associated Enterprises (AE) and Non-AE. 2. Whether segmental results can be rejected for not being audited. Analysis: Issue 1: Entity-Level Approach The appeal pertains to the assessment order for the assessment year 2011-12 under the Income-tax Act, 1961. The main contention raised by the assessee was regarding the adoption of an entity-level approach when dealing with transactions involving both AE and Non-AE. The ld. AR argued that a similar issue was considered by the Tribunal in the assessee's own case for the assessment year 2012-13. The Tribunal found merit in the contention of the ld. AR and referred to the findings of the coordinate bench in a previous case. The Tribunal emphasized that under the Transactional Net Margin Method (TNMM), the operating profit from each international transaction should be considered in relation to that specific transaction and not at the entity level. The Tribunal held that the TNMM should only be applied at the transactional level, and entity-level application is incorrect unless all transactions are with AE only. Issue 2: Rejection of Segmental Results The second issue revolved around the rejection of segmental results for not being audited. The Tribunal referred to previous cases where it was held that segmental results need not be audited and should be accepted if maintained in the ordinary course of business. The Tribunal emphasized that the Tax Authorities had the opportunity to examine the segmental results submitted by the taxpayer and should not reject them solely based on the lack of auditing. It was reiterated that entity-level profit cannot be used for Transfer Pricing (TP) analysis unless all transactions are with AE. The Tribunal emphasized that TP adjustments cannot be made without considering segmental results and that the TPO/DRP erred in adopting entity-level results for TP analysis. In conclusion, the Tribunal directed the Transfer Pricing Officer (TPO) to reconsider the issues in light of the findings of the coordinate bench and remanded the case for fresh determination. The appeal of the assessee was treated as allowed for statistical purposes.
|
