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2020 (1) TMI 774 - AT - Income TaxTPA - Applicability of Most Appropriate Method - Revenue has applied Transactional Net Margin Method [TNMM] whereas the assessee alleges Resale Price Method [RPM] as Most Appropriate Method - whether subvention revenue is part of operating profit thereby affecting PLI - HELD THAT:- RPM method identifies the price at which product purchased from the AE is resold to unrelated party; then in the case of resellers, who do not alter the tangible goods and services or use any intangible assets to add substantial value to the property or services i.e. resale is made without any value addition, then in such facts and circumstances, RPM method is to be applied as method to benchmark the international transaction undertaken. We hold so and allow the ground raised by the assessee on this issue. The Assessing Officer is directed to apply the RPM method in order to benchmark the international transaction undertaken by the assessee in the distribution segment, after allowing reasonable opportunity of hearing to the assessee Subvention income - whether the same is part of operating margin - HELD THT:- As decided in NALCO WATER INDIA LIMITED VERSUS ASST. COMMISSIONER OF INCOME TAX, CIRCLE 2, PUNE [2019 (9) TMI 609 - ITAT PUNE] subvention amount received by the assessee before us is operating in nature and the same has to be included as operating income, while computing PLI in the hands of the assessee. The assessee in the present appeal has not raised any issue about its taxability and hence, the said status is not disturbed Adjustment on account of AMP spent - HELD THAT:- There is no provision either in the Act or in the Rules to justify the application of BLT for computing the arms length price and also in the absence of BLT, the existence of an international transaction visà-vis the AMP expenditure cannot exist. Further, we hold that there cannot be a quantification of adjustment for determining the AMP expenses incurred by the assessee after applying the BLT, to hold the same to be excessive and thereby an existence of international transaction between the assessee and its AE. We find no merit in exercise carrying of Assessing Officer/DRP/TPO in this regard and delete the Transfer pricing adjustment made on account of AMP expenditure. Accordingly, we delete the adjustment on account of transfer pricing analysis of AMP expenditure.
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