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2023 (6) TMI 1211 - AT - Income TaxTP adjustment - ALP of the international transactions relating to merchanting trades - what should be the PLI of the assessee qua the PLI of the comparables? - only variation made by the TPO to the PLI of the assessee is to add the cost of goods to the denominator - HELD THAT:- Admittedly, in the TP study report, the assessee had furnished segmental information regarding both the merchanting trades segment and physical trade segment. TPO has also accepted the segmental analysis of the assessee. In fact, he has accepted the transactions in trading segment to be at ALP. As discussed earlier, the only variation, he has made in merchanting trades segment, is in relation to PLI of the assessee. Thus, neither the TPO nor DRP have made any adverse comment regarding the merchanting trades segment. When there is no allegation either by RBI or any other regulatory authority regarding merchanting trades segment of the assessee, in our view, DR cannot give a new dimension to the entire issue by making allegations which are not borne out on record. DR cannot improve upon the case of the TPO or learned DRP by enlarging the scope of the appeal. Thus, considering the fact that in the PLI of the comparables, cost of goods is not included in the denominator, in our view, the same would also apply to the assessee. Hence, cost of goods cannot form part of the denominator of PLI. Accordingly, we direct the Assessing Officer to compute the ALP by applying PLI of operating profit to value added cost, excluding the cost of goods. Grounds are allowed.
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