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TMI Blog2020 (7) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... O to compute the ALP by following the RPM method. Thus, the grounds of appeal of the assessee are allowed. - ITA No.8110/Del/2018 - - - Dated:- 29-6-2020 - Sh. Anil Chaturvedi, Accountant Member And Ms Suchitra Kamble, Judicial Member For the Appellant : Sh. Neeraj Jain, Adv., Sh. Ramit Katyal, C.A. For the Respondent : Sh. M. Barhwal, Sr. D.R. ORDER PER ANIL CHATURVEDI, AM: This appeal filed by the assessee is directed against the order dated 26.10.2018 passed by the DCIT, Circle 25(2) New Delhi pursuant to the directions of DRP, relating to Assessment Year 2014-15. 2. The relevant facts as culled from the material on records are as under: 3. Assessee is a wholly owned subsidiary of Topcon Corporation, a company incorporated in Japan and is stated to be engaged in the business of trading and service of surveying instruments. Assessee filed its return of income for A.Y.2014-15 on 27.11.2014 declaring total income of ₹ 6,15,40,200/-. It was noted by the AO that assessee had entered into international transaction with its Associated Enterprise (AE) and accordingly a reference u/s 92CA(3) was made to TPO to determine the Arms Length Price (A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort of finished goods undertaken by a distributor. 3.4 That the DRP/TPO erred on facts and in law in not appreciating that RPM being a traditional method is to be preferred over TNMM, a transactional profit method. 3.5 That the DRP/TPO erred on facts and in law in upholding the application of RPM holding that the assessee has also received commission and warranty reimbursements not appreciating that such transactions have been separately benchmarked applying TNMM. 3.6 Without prejudice, that the DRP/TPO erred on facts and in law in selecting functionally different companies as comparable to the appellant for the purpose benchmarking the international transaction of import of finished goods applying TNMM. 4. That the AO erred on facts and in law in levying interest under section 234D of the Act. 5. That the AO erred on facts and in law in initiating penalty proceedings under Section 271(1)(c) of the Act The Appellant craves leave to add to, amend, alter or vary, any of the aforesaid grounds of appeal before or at the time of hearing. 4. Before us, at the outset, the Learned AR submitted that though assessee has raised various grounds in the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge gross margin of the comparable companies, worked out the upward adjustment to the income of the assessee towards the international transactions of the purchases of finished goods at ₹ 1,75,60,240/-. The AO in the draft assessment order passed u/s 143(3)/144C dtd 16.12.2017 made the addition as directed by the TPO and computed the total taxable income at ₹ 7,91,00,440/-. 7. Aggrieved by the draft assessment order, Assessee carried the matter before DRP. DRP in their directions passed u/s 144C(5) dated 17.9.2018 upheld the TNMM method adopted by the TPO to be the most appropriate method for benchmarking the transactions but however directed the TPO/AO to include/exclude certain companies as comparables and recompute the adjustments. Pursuant to the aforesaid directions of DRP, AO in the final assessment order passed u/s 143(3)/144C dtd 26.10.2018 computed the addition on account of international transactions at ₹ 1,80,55,010/- and the total income was thus determined at ₹ 7,95,95,210/-. Aggrieved by the order of AO, the Assessee is now before us. 8. Before us, Learned AR submitted that that the only grievance of the assessee is on account of addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... traded goods. He submitted that it is a settled judicial position that in cases where ALP of a transaction can be determined by applying any of the direct methods namely CUP, RPM, CPM then they should be preferred over the transactional profit method namely TNMM and PSM. He thereafter submitted that when there is specific method specified in Rule 10B for determining the arm s length price of an international transaction of resale of the goods, the same needs to be applied in preference over the other methods and and in support of his aforesaid contentions he placed reliance on the decision of the Hon ble Apex Court in the case of Britannia Industries Ltd. reported in 278 ITR 546 (SC) and in the case of New Okhla Industrial Development Authority vs. CCIT reported in (2018) 95 taxmann.com 58 (SC). He further submitted the guidance note issued by Institute of Chartered Accountants of India also mandates the application of RPM method where the reseller does not add any significant value to the product. 10. He thereafter submitted that Hon ble Delhi High Court in case of Matrix Cellular International Services (P.) Ltd. reported in 90 Taxmann.com 54 has held the RPM method to be the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase is with respect to TPO addition of ₹ 1,80,55,010/- made on account of the ALP on purchase of goods. 14. It is an undisputed fact that assessee is into the business of distribution of surveying instruments. It is the assessee s submission that assessee was purchasing finished goods from its associated enterprises and selling it to unrelated parties without any value addition. The aforesaid contention of the assessee of reselling the goods to unrelated parties without any value addition has not been controverted by Revenue. 15. We find that the Assessee had applied RPM method to benchmark the international transactions of the goods purchased for resale. The RPM method followed was rejected by the TPO and he held that TNMM method to be the most appropriate method for determining the international transactions. 16. We find that various benches of the Tribunal have held that when the assessee purchases the products from its AE s and resales the same without any further value addition or further processing than RPM is the most appropriate method for determination of ALP of international transactions for which reference can be made to the decision of H ble Delhi High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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