Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2023 (2) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (2) TMI 1051 - AT - Income TaxTP Adjustment - MAM - use of segmental profitability on the basis that the trading turnover constitutes less than 10% of total sales of the assessee - HELD THAT:- We would like to refer to the decision of Sony Ericsson Mobile Communications India Pvt Ltd [2015 (3) TMI 580 - DELHI HIGH COURT] wherein held that in cases where the assessee is engaged in the manufacturing/sales trading activities it would be inappropriate to apply TNMM on entity wide basis. Keeping in mind the aforesaid decision of the Hon'ble Jurisdictional High Court of Delhi, all that we have to consider is as to whether the segmental results are to be taken into consideration or profit margin at entity level is to be considered. In light of the provisions of section 92 to 94 of the Act, international transactions are to be taken into consideration. Therefore, in our considered opinion, segmental results are to be considered and not the profit at entity level. Considering the factual matrix of the case in hand, nature of transactions are functionally different and even the risks assumed are different. We are, therefore, inclined to accept the stand of the ld. counsel for the assessee to bench mark the manufacturing segment and the trading segment separately. Rejection by ld. CIT(A) is solely on the ground that turnover of the trading segment is around 10% of the total turnover. This appears to be logical if considered as it If the same is considered in light of total sales made by the assessee for the year ended 31.03.2005, the picture is totally different. The assessee has recorded turnover of Rs. 1062 crores and 10% of which would be around 106 crores, claim of the ld. DR that it would be difficult to find comparables does not hold any water as several comparables can be found in Rs. 100 crores club. Thus we direct the AO/TPO to bench mark the international transactions separately segment wise with suitable comparables and decide the issue afresh after affording reasonable and adequate opportunity of being heard to the assessee. TP adjustment shall be made only with reference to international transactions undertaken by the assessee and not with reference to the overall turnover - In TP Regulations, price of only international transaction is to be determined for which adjustment of ALP is to be done in respect of international transactions only. TPO/Assessing Officer grossly erred in considering the total turnover and did not restrict the ALP adjustment to the international transactions. Therefore, we do not find any reason to interfere with the findings of the ld. CIT(A).
|