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2020 (3) TMI 796 - HC - Income TaxTP Adjustment - arm’s length price applying the TNMM method was contrary to the transfer pricing provisions - HELD THAT:- As decided in LI AND FUNG INDIA PVT. LTD. VERSUS COMMISSIONER OF INCOME TAX [2014 (1) TMI 501 - DELHI HIGH COURT] a determination of ALP with reference to the relevant factors (cost, assets, sales etc.) of the enterprise in question, i.e. the assessee, as opposed to the AE or any third party. The textual mandate, thus, is unambiguously clear. TPO’s reasoning to enhance the assessee’s cost base by considering the cost of manufacture and export of finished goods, i.e., ready-made garments by the third party venders (which cost is certainly not the cost incurred by the assessee), is nowhere supported by the TNMM under Rule 10B(1)(e) of the Rules. Having determined that (TNMM) to be the most appropriate method, the only rules and norms prescribed in that regard could have been applied to determine whether the exercise indicated by the assessee yielded an ALP. The approach of the TPO and the tax authorities in essence imputes notional adjustment/income in the assessee’s hands on the basis of a fixed percentage of the free on board value of export made by unrelated party venders - no question of law
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