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TMI Blog2022 (5) TMI 503X X X X Extracts X X X X X X X X Extracts X X X X ..... sidered only at Rs.2,24,02,515/- as against Rs.3,00,11,802/- taken by the Ld. TPO. If the revised closing stock figure of Rs.2,24,02,515/- is considered, then the gross profit margin of the comparable company as worked out in the table supra comes to 11.08%. The aforesaid tabulation has been reproduced in the order of the Ld. DRP in page 18. The workings thereon are not disputed by the Revenue before us. Hence, we direct the Ld. TPO to consider the gross profit margin of ADS Diagnostics Ltd., only at 11.08%. AR before us stated that if the revised gross profit margin of 11.08% is considered, then even after inclusion of said two comparables by the Ld.TPO, the assessee s margin would be through and no transfer pricing adjustment is req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d., Hence, we deem it fit to address the ground of inclusion of comparable company ADS Diagnostics Ltd., and its correct gross margins thereon to resolve the dispute before us. 2.1. We have heard the rival submissions and perused the materials available on record. We find that M/s B. Braun Medical (India) Private Limited (assessee herein) is a 100% subsidiary of B. Braun Medical Industries Sdn. Bhd., Malaysia. The assessee operates in the field of healthcare in India. It is mainly engaged in distribution of medical consumables/equipment purchased from its Associated Enterprise (AE). The products mainly include surgical equipment, intravenous administration ('IV') sets, infusion pumps, biotechnology, urology, dialysis equipment, e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rable companies was taken as 11.61% and accordingly, the said international transaction was considered to be its arm's length. The single year GP margin of the assessee s comparables was 13.41%. In its TP Study Report the assessee had taken 15 independent comparable companies for the purposes of comparison. In the TP proceedings, the Ld. TPO examined the functional profile of the assessee and noted that in the business activity relating to distribution, the AEs of the assessee provide technical assistance, product centric management support as and when required along with training to the employees of the assessee. It was noted that the assessee's field staff has to visit hospitals and institutions to procure orders. In the indenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rability analysis. The Ld. TPO also relied upon the OECD Guidelines of 2010 in this regard and has argued for the 'product comparability also in addition to 'functional comparability'. The Ld. TPO rejected 13 out of 15 comparable companies adopted by the assessee in its TPSR on the basis that their functional profile and business description does not match with that of the assessee. The Ld. TPO also noted that in the case of the assessee, the import content is about 70% but in the case of some of the comparables it is much less. The Ld. TPO used the filter of import content of 70% and added one new comparable of ADS Diagnostics Ltd. The Ld. TPO determined the Gross Profit Margin of the three final comparables to be 30% and held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act. Hence, the assessee is aggrieved before us. 2.5. It would be relevant to get into the financials of ADS Diagnostics Ltd., and the gross profit margins arrived thereon. The workings of the same are reproduced in the order of the Ld. DRP in page 18 are as under:- Particulars Amt. as per the TPO Amt. as per Assessee Reference to A R Sales Revenue (A) 5,45,83,296 5,45,83,296 Note17(i), page 39 Opening Stock 2,77,84,057 2,77,84,057 Note 12(i), page 38 Add: Purchases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alisable value which is in consonance with the Accounting Standard 2 (AS-2) on Valuation of Inventories issued by the Institute of Chartered Accountants of India (ICAI). Hence, the valuation adopted by the said comparable company is in accordance with generally accepted accounting principles and in consonance with accounting standards issued by ICAI which are mandatorily to be followed by every corporate in India. In view of the same, we find considerable force in the argument advanced by the Ld. AR that closing stock of inventories figure of ADS Diagnostics Ltd., should be considered only at Rs.2,24,02,515/- as against Rs.3,00,11,802/- taken by the Ld. TPO. If the revised closing stock figure of Rs.2,24,02,515/- is considered, then the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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