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2023 (1) TMI 1242 - AT - Income TaxTP adjustment to the manufacturing segment - determination of ALP in respect of import of parts and components from its AE in Manufacturing Segment - TPO rejected the transaction-wise benchmarking approach adopted by the assessee and proposed to adopt an aggregation approach with the TNMM method as the MAM for benchmarking on segment basis - HELD THAT:- We notice that the coordinate bench in assessee’s own case for 2014-15 [2022 (12) TMI 626 - ITAT BANGALORE] has considered the same issue. Notice that the assessee had adopted CUP as MAM to benchmark its international transaction of Import of parts and components for manufacture of PCs pertaining to its manufacturing segment and that the functions performed for undertaking its manufacturing activity for all the years i.e., AY 2006-07 to AY 2016-17 have remained the same. Accordingly respectfully following the decision of the coordinate bench we hold that CUP is to be considered as the MAM for the year under consideration also and we direct the TPO to replace TNMM with CUP. Grounds raised in this regard are allowed for statistical purposes. TP adjustment on account of excess AMP expenditure - DRP has upheld the analysis of the TPO stating that the cost of AMP incurred by the Appellant has benefitted AEs and accordingly AMP is an international transaction - HELD THAT:- For the year under consideration the net profit margin of the assessee in Trading Segment is 1.19% and the net profit margin of the comparable companies in 35th percentile to 65th percentile range is 0.13% to 1.48%. Since the margin of the assessee is within this range, the assessee had concluded that the price charged with respect to the Trading Segment is within arm’s length. We notice that no adverse inference drawn by the TPO in respect of the Trading segment results in the order passed under section 92CA and has directly proceeded to treat AMP expenses as international transaction. This in our view mean that the TPO has accepted the entity level margins earned by the assessee with respect to Trading Segment but proceeded to make TP adjustment on AMP expenses. The Hon’ble Delhi High Court in Sony Ericsson Mobile Communications India (P.) Ltd. 2015 (3) TMI 580 - DELHI HIGH COURT] held that once the revenue accepts the entity level margins as per the most appropriate method, it would be inappropriate to treat a particular expenditure as a separate international transaction. It was held that such an exercise would lead to unusual and absurd results. We also see merit in the submission of the ld AR that the ratio laid down by the decisions of the coordinate bench of the Tribunal in assessee’s own case for AY 2012-13 to 2015-16 is that that if the net profit margin meets the Arm’s length price, then no separate addition needs to be made. No adverse inference is drawn by the TPO in respect of the Trading segment which means that the TPO has accepted the overall margins of the said segment we direct the TPO to delete the adjustment made towards the trading segment. TP adjustment in relation to Administrative and Business Support Services and Sales facilitation services - Comparable selection - HELD THAT:- We notice that the DRP while considering the inclusions / exclusions did not examine the submissions of the assessee based on facts and has rejected the contention by making a cryptic observation. Therefore we are of the considered view that this issue should be remitted back to the DRP with a direction to do consider the submissions of the assessee and examine the facts based on evidences before deciding the inclusion/exclusion in accordance with law. Needless to say that the assessee should be given a reasonable opportunity of being heard. It is ordered accordingly. TPO is directed to re-compute the arm’s length price in accordance with the directions given in this order. Error in considering the assessed income in final assessment order, AO not granting brought forward loss, error in considering the Book Profits in final assessment order and the AO not granting appropriate TDS credit - We direct the AO to consider the issues afresh based on facts and evidences and decide in accordance with law after giving the opportunity of being heard to the assessee.
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