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2016 (3) TMI 459 - HC - Income TaxAdoption of Profit Level Indicator (PLI) of OP/TC to determine ALP - Tribunal rejected the TPO's PLI of 'Return On Capital Employed' (ROCE) - Held that:- We find that in terms of Rule 10B1( e) (i) of the Income Tax Rules, it is open for the authorities to determine the net profit margin by applying as its base either cost or sales or any other relevant base. It is for the authorities to determine the appropriate base while applying the TNMM entirely depending on the facts and circumstances of the case before it. Although the RoCE could be a basis to determine the profit margin to arrive at ALP having regard to capital employed as a base. In the present facts, as correctly emphasized by the Tribunal, there is a common pool of capital used both for International Transaction with AE's and also others. Thus, in the absence of identification or segregation of capital employed with regard to AE's transaction and those with others, the RoCE method would not indicate the appropriate margin for determining the ALP. Thus, the RoCE method has not been accepted by the Tribunal to determine the ALP. Further, even before us, as also before the Tribunal, the Revenue has not been able to show any determination of margin by RoCE method to arrive at the ALP of International Transactions in the Respondent-Assessee's industry. View taken by the Tribunal is a reasonable and possible view
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