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TMI Blog2015 (9) TMI 1410X X X X Extracts X X X X X X X X Extracts X X X X ..... t RPM method is the most appropriate method when assessee is selling goods purchased from the associated enterprises as such, has been held by the Mumbai Bench in the case of M/s L’Oreal India Pvt. Ltd., (2012 (11) TMI 175 - ITAT MUMBAI). As a necessary corollary to the above discussion, we are of the opinion, that the AO/TPO has to do a fresh analysis of international transaction involving trading of imported goods, considering RPM method as the most appropriate method. Other grounds raised by the assessee were with respect to the comparables, considered by the TPO in TNM method study, and this has become irrelevant in view of our finding that the RPM method was the best suited one. - Decided in favour of assessee for statistical purposes. - I.T(TP).A No.436/Bang/2015 - - - Dated:- 30-9-2015 - SHRI. N. V. VASUDEVAN, JUDICIAL MEMBER AND SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER Appellant by : Shri. Chavali Narayan, CA Respondent by : Smt. Neera Malhotra, CIT ORDER PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : In this appeal filed by Revenue, grounds read as follows : 1 . The directions of the Dispute Resolution Panel are opposed to law and facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that TNMM was the most appropriate method. He there after made analysis of the international transactions based on the TNMM. Assessee had assailed this before the DRP and the DRP held that RPM was the most appropriate method in the situation of the business of the assessee for analysing the value of the international transactions with regard to purchase of finished goods from its AE abroad and sale thereof in the local market. DRP had remitted the matter back to the AO for evaluating the value of international transactions of the assessee based on RPM. However, in the assessment order passed, AO had simply deleted the additions proposed by the TPO on a premise that the DRP had deleted the additions suggested by the TPO. Since the fact-situation is very similar to that in the assessment year 2008-09, in our opinion the directions given by this Tribunal for the said year would apply here also. Relevant paragraphs 11 to 21 of the order dt.17.10.2014, is reproduced hereunder : 11. Facts apropos are that the assesee is a wholly owned subsidiary of M/s Sanyo India Pvt.Ltd.,Japan, primarily engaged in the business of distribution and sale of consumer durables in the nature of washing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee the aggregate value of purchases during the relevant previous year came to 97.75 Crores, whereas imports from associated enterprises only ₹ 59.96 Crores. Assessee s insisted that RPM method was the direct and most appropriate one in its case. Assessee also relied on OECD guidelines, in support of its contention that RPM method was best suited to it. 14. However, TPO was not impressed by the above. According to him, purchases from associated enterprises were more than 60% of the total purchases. Further, as per the TPO, assessee had taken multiple years data of comparables while doing the TP analysis. Assessee also could not establish functional similarity of the products sold by it and the products sold by comparables selected by it. Therefore, he rejected the re-sale price method adopted by the assessee and substituted with TNM method. 15. Assessee objected to the above treatment before the DRP. However, this was however, not successful. DRP was of the opinion that assessee could not have adopted multiple year data. It confirmed the view taken by the TPO. The AO thereafter, accepted the recommendation of the TPO and made an addition based on TNM method. 16. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edure prescribed under the Rules, could not say that the TPO had erred in adopting TNM method. AS per the learned DR, the TPO has specifically mentioned at para-5 of his order the reasons why he was rejecting the RPM method. Assessee could not establish the functional similarity of the product imported and sold by it with that of the comparables selected by it. Therefore, according to him, the lower authorities had taken a correct view on this issue. 18. We have perused the order, and heard the rival contentions. There is no dispute that the assessee had followed RPM method for analyzing its international transactions relating to goods imported by it from its associated enterprise abroad and sold here in the local market. There is also no dispute that the assessee was importing these goods in the finished stage and selling it without making any value additions thereon. The only work rendered by the assessee was re-packing the cartons received from its supplier abroad. In other words, assessee was acting purely as a trader. Rule 10C of the Rules requires adoption of the most appropriate method which best suits the facts and circumstances of each of particular international transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n segment activity of the assessee, we do not find any infirmity with the order of the ld.CIT(A) in deleting the addition of ₹ 4,90,07,000/- made by the AO. Ground no.2 is accordingly rejected by upholding the order of the ld.CIT(A). Similarly in the case of M/s Star Diamond Group Vs DDIT (supra), it was held under at para-13 of its order as follows; 13. This finding in our humble opinion is wrong for the reason that the CIT(A) has adopted these very comparables, along with three other while arriving at the operating margins at para-7.16 of his order. As the assessee is a trader, without value addition to the goods, we find force in the submission of the assessee that resale price method is the most appropriate method for determining the ALV with respect to AE transaction. In fact, the revenue has accepted this method in earlier two years. The transfer pricing officer in his order dated 7-3-2005 for the assessment year 2002-03 and order dated 20-03-2006 for the assessment year 2003-04, has agreed with the computation of arms length price made by the assessee under the resale price method. If the comparables are not found appropriate, fresh comparables can be searched, bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 11.57 Peerless Developers Ltd., 4.68 5.84 - 5.28 XPRO Global Ltd., 7.96 15.01 21.84 18.35 Arithmetic mean (%) 10.87 9.96 15.48 11.49 Learned counsel for the assessee has stated at bar that years mentioned in the above table were financial years ending 31-03- 2006, 31-03-2007 and 31-03-2008. If that be so, the TPO was having results of the comparables selected by the assessee for the relevant previous year as well. If the TPO found that the comparables were dealing in different type of goods, he could select by himself a set of comparables after giving proper reasons. There were many other companies dealing with goods similar to that of the assessee. Nothing stopped the TPO from working out the ALP based on the data which was available on record or from getting a fresh set of comparables, which was appropriate in his opinion. In other words, according to us, the reason for reje ..... X X X X Extracts X X X X X X X X Extracts X X X X
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