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2022 (12) TMI 670 - AT - Income TaxTP Adjustment - benchmarking of transaction - whether the transactions being import of finished goods from associated enterprises benchmarked by the assessee adopting the resale price method where the profit level indicator is determined of gross profit ratio and the gross profit ratio of assessee was found to be at 15.35% whereas of the other comparable companies was 14.64% which is stated to be at arm’s-length by the assessee, is proper or not? - HELD THAT:- When it is claimed undisputedly by the assessee that with respect to the trading of goods, assessee does not undertake any value addition, we failed to understand the reasoning given by the learned dispute resolution panel in rejecting the resale price method as most appropriate method and upholding transactional net margin method. According to rule 10 B (1) (b) resale price methods is the method where the normal gross profit margin earned by a tested party is required to be compared with comparable uncontrolled transactions. When undeniably assessee is selling the goods imported from associated enterprises to the third parties, the resale price method is the most appropriate method, where the segmental results to the gross profit level are available. Direction of the learned dispute resolution panel in rejecting reliance on the decision of L’Oreal India private limited [2015 (2) TMI 407 - BOMBAY HIGH COURT] is also not proper. The finding of the learned dispute resolution panel that in that case that assessee was engaged only in trading activities is clearly an incorrect fact recorded by the learned dispute resolution panel, which can be gathered from the coordinate bench decision reported [2012 (4) TMI 752 - ITAT MUMBAI] which was challenged by the revenue before the honourable Bombay High Court. Thus, in that case honourable Bombay High Court [2015 (2) TMI 407 - BOMBAY HIGH COURT] in case of an assessee who was engaged in the business of manufacturing and trading in cosmetics held that for the trading activities in cosmetic segment, adoption of the resale price method by the assessee was upheld. In view of this, we do not have any hesitation in accepting submission of the assessee that for benchmarking of the international transaction of trading activities where assessee imports finished goods and sold it to third party without undertaking any value addition, resale price method should be adopted as most appropriate method. The submission of the assessee is also supported by the order of the honourable jurisdictional High Court. As we already noted that the margin shown by the assessee of gross profit is 15.35% compared to the comparable companies of 14.60% we direct the learned transfer pricing officer/AO to delete the consequent adjustment - Accordingly we reverse the order of the learned lower authorities and allow ground number 2 of the appeal.
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