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TMI Blog2015 (10) TMI 1067X X X X Extracts X X X X X X X X Extracts X X X X ..... -4-2014 - G.S. PANNU AND R.S. PADVEKAR, JJ. For the Appellant : S.P. Walimbe. For the Respondent : Rakesh Gupta. ORDER:- PER : G. S. PANNU This appeal by the Revenue is directed against an order of the Commissioner of Income Tax (Appeals)-XX, New Delhi dated 28.09.2012 which, in turn, has arisen from an order dated 25.11.2008 passed by the Assessing Officer u/s 143(3) of the Income-tax Act, 1961 (in short the Act ) pertaining to the assessment year 2005-06. 2. The Revenue has assailed the order of the CIT(A) on the following Grounds of Appeal :- 01. The learned Commissioner of Income-tax (Appeals) erred in holding that the assessee was a service provider and was thus entitled to commission whereas the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aged in the business of wholesale trading and installation of furniture. The respondent-assessee is also engaged in the activity of providing marketing and installation support services to some of its associated enterprises based abroad, namely, Haworth Furniture (Thailand) Co. Ltd. and Haworth Singapore Pte. Ltd.. It was noticed that the assessee had entered into the certain international transactions with its associated enterprises on account of Provision of marketing support services at stated value of ₹ 10,75,76,153/-. In order to benchmark its international transactions with the associated enterprises, assessee selected the Transactional Net Margin (TNM) method as the most appropriate method in its Transfer Pricing Study. The Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sales made to the Indian customers. In sum and substance, according to the TPO, assessee was acting as a full-fledged distributor of Haworth products in India and therefore the correct transfer pricing approach would be to examine the international transactions from the perspective of an independent distributor and not from the stand point of a service provider. The said stand of the TPO is in line with similar stand taken by the Revenue for the immediately preceding assessment year 2004-05. 6. The second area of difference between assessee and the TPO was the manner of computing the PLI. The TPO changed the PLI from Operating profits/ Total costs taken by the assessee to Operating profit/ Sales. The TPO chose 5 comparables out of 8 se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ker on the prices at which sales need to take place and in the present case the said responsibility/prerogative was of the associated enterprises and not of the assessee. It was also pointed out that the associated enterprises were responsible for all the claims of warranties, etc. towards the Indian customers and assessee was not liable for the same. That assessee was not carrying any inventory risk since it was not maintaining any stocks for re-sale, which would have been a case if assessee was a trader. It was pointed out that being a marketing support services provider assessee was bearing the credit risk only to the extent of commission income accruing on the respective sales and in so far as the credit risk of the entire sale price re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee's own case for assessment year 2004-05 dated 27.02.2013 (supra) and pointed out that both the issues raised by the Revenue in the present year were subject-matter of consideration by the Tribunal wherein the stand of the CIT(A) was upheld. Apart therefrom, learned counsel for the assessee submitted that in the subsequent assessment years of 2006-07 and 2007-08, the nature of functions of the assessee in the segment of Provision of marketing support services to the associated enterprises has been accepted by the TPO to be that of a service provider and not a distributor. Even with regard to the manner of computing the PLI in the subsequent assessment years the formula adopted by the assessee of Operating Profits/ Total cost has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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