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TMI Blog2023 (1) TMI 1271X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, according to him, if this adjustment is taken into account, the tax impact would be less than the prescribed monetary threshold limit. Appellant however, says that the fate of the said appeal will not be determined on the basis of tax impact since this is not an appeal that pertains to deletion of the adjustment made. This aspect of the matter will be examined on the next date of hearing. - ITA 22/2023 & CM No. 1876/2023 And ITA 23/2023 & CM No. 1880/2023 - - - Dated:- 30-1-2023 - Hon'ble Mr. Justice Rajiv Shakdher And Hon'ble Ms. Justice Tara Vitasta Ganju For the Appellant : Mr. Vipul Agarwal and Mr. Parth Semwal, Standing Counsels for Mr. Zoheb Hossain, Sr. Standing Counsel. For the Respondent : Mr. C.S. Aggarwal, Sr. Adv. with Mr. Prakash Kumar and Mr. Uma Shankar, Advs. ORDER [Physical Hearing/Hybrid Hearing (as per request)] 1. These appeals impugn a common order dated 21.05.2019 passed by the Income Tax Appellate Tribunal [in short, Tribunal ]. 2. ITA No.22/2023 concerns Assessment Year (AY) 2013-14, while ITA No.23/2023 concerns AY 2012-13. 3. According to Mr Vipul Agarwal, who appears on behalf of the appellant/revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmission has placed before us a hard copy of the order dated 22.10.2018 passed by the Tribunal, upon remand by the coordinate bench of this court. 10. We have been taken by Mr C.S. Aggarwal through the order passed by the Tribunal. Briefly put, the Tribunal has returned the following two significant findings of fact: 10.1 First, the Transaction Net Margin Method (TNMM) would be the most suitable method for determining Arm s Length Price (ALP) for international transactions concerning indenting transactions entered into by the respondent/assessee with its AEs. 10.2 Second, the Berry ratio method for calculating Profit Level Indicator (PLI) would be most appropriate insofar as the respondent/assessee is concerned. 11. In respect of the aforesaid findings of fact, a detailed analysis has been made by the Tribunal in paragraphs 15 to 19 of its order dated 22.10.2018. For the sake of convenience, the relevant paragraphs are extracted hereafter: 15. We have heard the parties at length and also perused the material referred to before us as discussed herein above. The approach of determining the ALP on the basis of average percent of commission reported by the assessee in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence in volume on FOB basis and the geographies dealt are also entirely different. The amount of average commission earned with the AE, is 1.58% whereas in the case of non AE it is 2.26. All these differences are permeating in all the Assessment Years as highlighted by the assessee in the chart submitted before us and on perusal of the same, it is quite glaring that under both the transactions, i.e., controlled transaction with the AE and uncontrolled transaction with the non AEs, there are huge dissimilarity between the products, difference in volume, difference in value, markets and geographical location. 16. It is quite settled proposition that while applying CUP method, a very high degree of similarity has to be seen between the control and uncontrolled transactions not only in terms of products, contractual terms, volume, value but also market and geography locations. The reason being under CUP, price charged or paid for the property transferred has to be identified and the differences between the international transaction and the comparable uncontrolled transactions has to be seen which could materially affect the price in the open market. The price of different produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of valuable intangibles. The nature of the assessee's business is a routine business support services and there is no creation of any human capital or supply chain intangible. The Hon'ble High Court has held that berry ratio can only be applied where the value of goods is not directly linked to the quantum of profits and the profits are mainly determined on expenses incurred. Here in this case, the assessee is acting as an indenting agent commission service provider, i.e., as a facilitator of a trade and has no financial risk, because assessee was not required to raise any invoice for sale and purchase in its financial commitment and risk are insignificant. As a service provider, the key business driver for the assessee is operating expenses incurred on establishment and operation of business, i.e., salary, rent and other such expenses and it does not employ any significant assets in the business except for routine assets like office, furniture and fixtures to run its business and also there is no intangible creation by the assessee company. Besides there is no trading capital employed as goods are neither bought nor sold by the assessee in the indenting segment. U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by this Tribunal in preceding assessment year, we do not find any reason to deviate by adopting any other method other than TNMM. Respectfully following view taken by this Tribunal in preceding years, we remand the issue back to file of Ld. TPO to examine and benchmark international transaction by adopting TNMM as most appropriate method by taking Berry ratio as PLI, as has been approved by Hon‟ble High Court. Needless to say that assessee shall be granted proper opportunity as per law. 12. Mr Vipul Agarwal, who appears on behalf of the appellant/revenue, says that the Tribunal has not carried out an independent exercise in the AYs in issue, i.e., AY 2013-14 and AY 2012-13. 12.1 It is Mr Vipul Agarwal s submission that the Tribunal has simply followed the judgment of the coordinate bench, whereas, in fact, the decision required the Tribunal to carry an independent exercise bearing in mind the principle laid down therein. 13. Prima facie, the submission advanced by Mr Vipul Agarwal does not impress us. The appellant/revenue has not brought on record anything which would suggest that the analysis carried out by the Tribunal in its order dated 22.10.2018 was egreg ..... X X X X Extracts X X X X X X X X Extracts X X X X
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