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2021 (3) TMI 69 - AT - Income TaxTP Adjustment - re-computation of ALP by combining both Import of material and Export of Finished goods and applying TNMM and thereby upward adjustment - In respect of the import of materials and export of Finished goods TPO applied TNMM as the MAM for both the aforesaid transactions on combined basis and recomputed the ALP by considering 5.15% as Arm's Length Margin and made addition of INR 3.42 crores to the returned losses - HELD THAT:- As decided in own case [2020 (10) TMI 933 - ITAT DELHI] it is not the case that assessee has resold the same goods with only minor modifications to justify the adoption of RPM as the most appropriate method. In the present case the assessee has assembled the goods partly purchased from its associated enterprise and partly developed by its own vendor. Therefore, the decision relied upon by the learned authorised representative MSS INDIA (P) LIMITED. [2009 (5) TMI 600 - ITAT PUNE-A]does not help the case of the assessee. In view of the above facts we do not find any infirmity in the order of the learned assessing officer/transfer pricing officer as well as the direction of the learned dispute resolution panel in rejecting the resale price method adopted by the assessee and adopting transactional net margin method as the most appropriate method. - Decided against assessee. Working capital adjustment - Addition while applying TNMM on account of difference in working capital of the comparable companies and that of the assessee - HELD THAT:- There is no denial of the fact that in the earlier assessment years, namely, assessment years 2011-12 and 2012-13 TPO allowed the working capital adjustment since the facts and circumstances involved in this year are similar to the facts and circumstances for the earlier assessment years, there is no justification for not allowing the same for this particular year. Having regard to this anomalous situation, we are of the considered opinion that the working capital adjustment should have been allowed for this year also. We therefore while answering ground No. 2 in favour of the assessee, direct the learned Assessing Officer/Ld. TPO to allow working capital adjustment to the assessee for this assessment year also. Recomputation of the arm's-length price by applying the entity level margins of tested party - ignoring segmental margins in respect of "marketing support services" and also by selecting six new companies why rejecting two companies selected by the assessee for such comparison - There is no dispute that the assessee has maintained segmental records in relation to the Management Support Services. It is not decipherable from the orders of the authorities below that these segmental records are rejected for any explicit reasons. Ld. TPO adopted the entity level margins of the assessee as well as the comparables. There is no denial as to the submissions of the ld. AR that the segment of Management Support Services is different from other activities performed by the comparables. In Technimount ICB Pvt. Ltd. [2013 (9) TMI 595 - ITAT MUMBAI] as held that as per the provisions contained in Chapter-X vide provisions 92-94, international transactions are to be taken into consideration for determination of Arm's Length Price and for such purpose wherever it is practicable and available, the segmental results have to be considered and not to the profit at entity level. In view of the undisputed availability of the segmental results in the case of the assessee as well as the comparable companies, in respect of Management support services, we are of the considered opinion that the ld. TPO should have taken them into consideration. For this purpose, we set aside the issue to the file of ld. Assessing Officer/TPO for comparison of the segmental results and not the margin at entity level. Rejection of two entities, namely, Best Mulyankan Consultants Ltd. and Indus Technical & Financial Consultants Ltd. from the list of comparables holding those to be functionally dissimilar - It is seen from the record that the assessee has not produced the material to capture functional profile of these two companies with reference to the agreements for provision of services and the material produced before us in the shape of relevant extracts of annual report is insufficient to reach a definite conclusion on this aspect. When we have to compare the functional profile in the teeth of the objection taken by the ld. TPO, to retain these two entities in the list of comparables, matter requires deeper analysis. No such material is forthcoming. Hence, we hold that the assessee failed to substantiate their claim that Best Mulyankan Consultants Ltd. and Indus Technical & Financial consultants Ltd. are good comparables to the assessee. Companies functionally dissimilar with that of assessee need to be deselected from final list. Non-comparable of certain companies in view of their huge and disproportionate turnover more than 200 times to that of the assessee when compared to the entities like assessee.
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