2020 (9) TMI 324 - AT - Income Tax

TP Adjustment - Comparable Uncontrolled Price (CUP) method as applied by the assessee to be the most appropriate method - HELD THAT - On a perusal of the material placed before us, we find that while deciding identical issue in assessee s own case in assessment year 2004 05 2012 (4) TMI 260 - ITAT MUMBAI the Tribunal has accepted the benchmarking done by the assessee under CUP method and has also held that the profit sharing ratio of 50 50 is prevalent both in respect of agreement entered into between group companies with unrelated parties as well as the assessee. - Decided in favour of assessee. Addition made to the Low gross profit - after rejecting the books of account, the Assessing Officer computed the gross profit rate and proposed additions - HELD THAT - There is a specific finding by learned DRP that neither the Assessing Officer has made any adverse remark alleging non furnishing of any details by the assessee nor regarding the maintenance of regular books of account by the assessee. It also appears from record, the Assessing Officer has examined the books of account and the materials furnished before him and has not made any adverse remark regarding the correctness or completeness of the accounts. Simply relying upon a statement recorded from the Vice President of the company, the Assessing Officer has concluded that the assessee might have manipulated its profit. Thus, as could be seen from the material on record, there is no contrary evidence brought on record by the Assessing Officer to establish that the books of account maintained by the assessee are unreliable or the assessee has manipulated them. It is also a fact on record that the parties with whom the assessee has entered into transactions are not related parties. None of the factual finding rendered by learned DRP has been controverted before us with corroborative evidences. Thus, it is very much clear, the additions on account of low gross profit has been made purely on conjecture and surmises without any supporting evidence. That being the case, we do not find any reason to interfere with the decision of learned DRP on the issue

Summary

Issues involved:
1. Assailing the decision of accepting the Comparable Uncontrolled Price (CUP) method.
2. Deletion of addition made on account of transfer pricing adjustment.
3. Deletion of addition made to the gross profit.

Issue 1: Assailing the decision of accepting the Comparable Uncontrolled Price (CUP) method:
The appeals by the Revenue and cross objections by the assessee arose from orders of the Dispute Resolution Panel concerning assessment years 2010-11 and 2011-12. The primary issue was the acceptance of the CUP method by the assessee for benchmarking international transactions with overseas Associated Enterprises. The assessee argued that profits were shared equally between AEs participating in transactions, supported by evidence. The Transfer Pricing Officer rejected the CUP method, proposing adjustments based on the Transactional Net Margin Method (TNMM). However, the Tribunal, considering past decisions, upheld the DRP's decision in favor of the assessee, citing consistent views in previous assessment years.

Issue 2: Deletion of addition made on account of transfer pricing adjustment:
The second common issue pertained to the deletion of additions made to the gross profit following a search and seizure operation related to the Commonwealth Games. The Assessing Officer proposed additions based on decreased gross profit, suspecting adjustments due to transactions related to the games. However, the DRP, after examining the evidence, found no wrongdoing by the assessee and deleted the additions. The Tribunal upheld the DRP's decision, noting the lack of adverse findings on the assessee's books of account and the absence of evidence supporting the Assessing Officer's suspicions.

Conclusion:
The Tribunal dismissed the Revenue's appeals and the assessee's cross objections, upholding the decisions of the DRP in both issues. The Tribunal found no reason to interfere with the DRP's decisions, emphasizing the lack of evidence supporting the Revenue's contentions. The cross objections were deemed infructuous in light of the dismissal of the Revenue's appeals. The Tribunal pronounced the order on September 3, 2020, in accordance with the applicable rules.