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2019 (3) TMI 1696 - AT - Income TaxTP Adjustment - Arm’s Length Price (ALP) of the reimbursement of technical fee - HELD THAT:- The purpose of determining ALP of a transaction is to find out as to whether similar kind of payments would have been made to an unrelated party for similar kind of services rendered. Hence the details relating to nature of services that were received by the assessee are, in our view, crucial for determining ALP. Hence we are of the view that the TPO has not questioned the genuineness of transactions. We also agree with the contentions of the Ld. DR that the copies of invoices received by the assessee from its AE would not demonstrate the details of services received by the assessee. From the order of TPO, we noticed that the assessee has given examples of services received by it from its AE Though the assessee has claimed to have received the above said services, yet it has not furnished any material to demonstrate that the above said services were actually received. Hence, in the absence of any material to prove the details of services actually rendered by the AE, it would be difficult for the tax authorities as well as for the Tribunal to appreciate the contentions of assessee. Before us, the Ld. AR submitted that the assessee has prepared a detailed note explaining the details of services received by it. In the interest of natural justice, we are of the view that the assessee may be provided with one more opportunity in this matter. Accordingly we admit the additional evidences furnished by the assessee explaining the details of received services provided by its AE. In view of the above, this issue requires fresh examination at the end of AO/TPO. TP adjustment made in respect of import of men’s wear from its AE - Selection of MAM - RPM or TNMM - AR submitted that the assessee imports men’s wear from its AE and distributes the same as it is without making any value addition - HELD THAT:- The assessee is the distributor of men’s wear imported from its AE. It does not carry out any value addition. Though the assessee is alleged to have incurred huge expenses on advertisement and market promotion, the same would not increase the inherent value of the products. In the case of simple distribution of products, it has been consistently held in the above said case laws that the “Resale Price method” (RPM) is the most appropriate method. Under the RPM, the profits are compared at Gross Margin level, in which case, the expenses incurred on Advertisement and Marketing should not be deducted while arriving at the Gross profit margin. Hence the TNMM method adopted by the assessee as well as the TPO is not appropriate method. Since the T.P study requires to be carried out afresh by adopting “RPM”, we set aside the order passed by the AO on this issue and restore the same to his file for examining this issue afresh. Appeal of the assessee is treated as allowed for statistical purposes
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