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TMI Blog2023 (10) TMI 1026X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee. Appeal filed by the Assessee is partly allowed for statistical purposed. - Shri G. S. Pannu, President And Shri Yogesh Kumar U.S., Judicial Member For the Assessee : Shri Rohit Tiwari, Adv.; and Ms. Tanya, Adv For the Department : Shri Mrinal Kumar Das, Sh. Mrinal Kumar Das, and Dr Sh. Mahesh Shah, CIT (DR) ORDER PER YOGESH KUMAR U.S., JM The present appeal is preferred by the assessee for the Assessment Year 2014-15 against the assessment order dated 22/12/2107 passed by the Addl. CIT, Special Range-5, New Delhi u/s 143(3) r/w Section 144C(3)/144C(3) of Income tax Act, 1961,( the Act for short). 2. The assessee has raised the following grounds of appeal:- 1. That on the facts and circumstances of the case and in law, the impugned order passed by the Learned Commissioner of Income Tax (Appeals) - 44, New Delhi [ Ld. CIT(A) ] is bad in law. 2. That on the facts and circumstances of the case, the Ld. CIT(A) / the Learned Additional Commissioner of Income Tax, Special Range 5, New Delhi ( Ld. AO ) / the Learned Assistant Commissioner of Income Tax, TPO-2(2)(l), New Delhi ( Ld. TPO ) have grossly erred in assessing / upholding t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. That on the facts and circumstances of the case, the Ld. CIT(A) / Ld. AO/ Ld. TPO have erred in ^ disregarding various comparability adjustments (including working capital and foreign currency) in determining the arm s length profit margin; 8. That on the facts and circumstances of the case, the Ld. CIT(A) / Ld. AO / Ld. TPO have erred in including certain companies in the final set of comparable companies despite the fact that those companies fail the related party transaction filter of 25 per cent; 9. That on the facts and circumstances of the case, the Ld. CIT(A) / Ld. AO/ Ld. TPO have erred in 0 disregarding the computation of margins, submitted by the Appellant during the course of assessment proceedings, of the comparable companies selected by the Ld. AO/ Ld. TPO; 10. That the Ld. CIT(A) / Ld. AO / Ld. TPO have erred in disregarding the judicial pronouncements in India with respect to the issues comprised in the grounds raised above; 11. That on the facts and circumstances of the case, the Ld. AO/ Ld. TPO have grossly erred in initiating penalty proceedings u/s 271(l)(c) of the Act. That the above grounds of appeal and sub-grounds therein are ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. -6,91,21,104/-. 7. As against the assessment order dated 22/12/2017, the assessee has preferred an Appeal before the CIT(A) , the Ld.CIT(A) by order dated 14/03/2019 partly allowed the Appeal. 8. Aggrieved by the same, the assessee has filed the present appeal on the grounds mentioned above. 9. The Ld. Counsel for the assessee submitted that Ground No. 1 2 are general in nature, which requires no adjudication and further submitted that except Ground No. 3 and its sub grounds which are in respect of disregarding application of resale price method by the Ld. TPO/A.O and Ground No. 8 regarding inclusion of certain Companies in the final set of comparable all other Grounds are not pressed. 10. The Ld. Counsel for the assessee further submitted that the Ld. TPO in the TP order has rejected the characterization of the assessee as a normal distributor and characterized the assessee as a Company performing functions more than applying distributor. The Ld. Counsel for the assessee further relied on the various judicial pronouncements and submitted that the Ld. TPO/A.O ought to have concluded that RPM should be applied in the case of the assessee. Further submitted that, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... served that the reseller generally performs the functions of advertising, marketing, distribution and guaranteeing the goods, financing the stocks and warranty risk. We find that the assessee is also performing all these functions which a normal distributor/reseller would undertake in a comparable uncontrolled transaction. 15. We are of the considered view that the extent of incurring expenses including employee costs for performing these functions is the prerogative /business decision of a company s management based on the market penetration policies adopted by a company. The characterization of a reseller, who does not add value to the purchased product would not change owing to the mere fact that the tested party and comparables have incurred varying levels of employee costs, or selling and distribution, or marketing and promotion expenses for boosting company s own sales volume. 16. In our humble opinion, since the expats came to help the assessee to set up its business and employee costs included an exceptional expenditure amounting to Rs. 1,61,62,594/- for two of its expatriate employees towards payment for salaries and other expenses for the purpose of stabilizing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity of gross profit margin as PLI for the purpose of comparison. In terms of our aforesaid observations, we are of the considered view that the TPO/DRP while dislodging the RPM followed by the assessee for benchmarking its international transactions, had lost sight of the fact that only the transaction of import of goods by the assessee from its AEs were to be benchmarked and all the other functions carried out by the assessee having no nexus with the said import transactions were, thus, not relevant for the said benchmarking analysis. 19. This Tribunal in Nokia India Pvt. Ltd 153 ITD 508 has held that incurring of high advertisement and marketing expenses by the assessee vis-a-vis the other comparable companies does not in any manner affect the determination of ALP under RPM. 20. Similar view was taken by the Pune Bench of the Tribunal in ITA No. 235/PUN/2013. 21. Considering the facts of the case in totality, we have no hesitation to hold that the assessee is a pure trading company involved in the distribution activity without adding any value to the purchased product and hence the RPM is the most appropriate method. We, accordingly, direct the Assessing Officer/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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