Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2023 (9) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (9) TMI 973 - AT - Income TaxTP Adjustment - comparable selection - HELD THAT:- Arvind Lifestyle Brands Limited - We remand this comparable back to the Ld.AO/TPO to carry out necessary verification having regard to the annual reports of this comparable that has already there placed on record. Assessee may assist the Ld.TPO/AO in determining the eligibility of this comparable by providing relevant information as called for. Needless to say that proper opportunity of being heard must be granted to assessee. Exclusion of KD Trend Wear Ltd., Sohum Shoppe Ltd. and Major Brands Pvt. Ltd. as the above comparables were rejected by the Ld.TPO as these were not appearing in the search matrix of the TPO - We are of the opinion that merely because these comparables do not appear in the search process by the Ld.TPO, it cannot be excluded if assessee is able to file the annual reports which are verifiable - Case followed Prism Networks [2022 (2) TMI 1296 - ITAT BANGALORE] - thus we remand these comparables to the Ld.AO/TPO to reconsider them in the light of the annual reports that will be filed by assessee. In the event they are found to be functionally similar with that of assessee, the same may be included in the final list. SSIPL Lifestyle Pvt. Ltd. - On perusal of the annual report of this company the business profile is revealed to be primarily engaged in business of trading of footwear and apparels etc. also submission of the assessee that the parent company of this comparable is into manufacturing activity whereas this company perse engaged in trading activity. In our considered opinion, this needs to be verified and in the event it is found that this comparable is carrying out trading activity, the same may be included. Accordingly, we remand this comparable back to the Ld.AO/TPO for verification as directed above. Aditya Birla Fashion and Retail Ltd. - We note that the annual reports has not been looked upon by the revenue authorities before rejecting this comparable. In the interest of justice, we remand this comparable to the Ld.AO/TPO for reconsidering the plea of assessee in the light of the annual reports. Accordingly we remand this comparable back to the Ld.AO/TPO for necessary verification in accordance with law. Metro Brands Ltd. - As this comparable has been held to be functionally not similar with that of assessee in assessee’s own case by the Coordinate Bench of this Tribunal [2022 (9) TMI 1505 - ITAT BANGALORE] for Assessment Year 2015-16 in the preceding assessment year, we direct the exclusion of this comparable for the relevant year under consideration. Adidas India Mktg. Pvt. Ltd. - We note that assessee is challenging the functional similarity of this comparable only because the rental expenditure of this comparable is much lower than the rental expenditure incurred by the assessee. It is the submission of the Ld.AR that the high rental expenditure in the hands of the assessee affects the operating profits and therefore the business model is different as compared to Adidas. Working capital adjustment would take care of these itself by not considering such item which can be identified for computing the operating profit of the assessee in order to iron out the differences. We direct the Ld.AO/TPO to consider this comparable by excluding the rental expenditure for the purpose of computing the margins to determine the comparability. Thus this comparable is directed for inclusion. Sreeleather Ltd be excluded as functionally different. Pokarna Marketing Pvt. Ltd. As assessee was arguing certain comparables for inclusion, more particularly KD Trend Wear Ltd., the assessee argued that this comparable is functionally similar with that of assessee as it is engaged in trading of clothing and footwear and it passes all the filters applied by the Ld.TPO. Going by the same principle, we remand this comparable to the Ld.TPO for necessary verification on the functional similarities to be considered in accordance with law. We apply the same principle to the present comparable and direct the Ld.TPO to verify the filters that has been applied and in the event it is found to satisfy all the necessary filters, the same be considered. Accordingly we remand this comparable back to the Ld.AO/TPO. V F Brands India Pvt. Ltd. and Tommy Hilfiger Arvind Fashion Pvt. Ltd.- AR submitted that the operating margin considered by the Ld.TPO of these companies are incorrect - We accordingly direct the Ld.TPO to recomputed the ALP having regards to the financials of the two companies and determine the margins afresh in accordance with law. Working capital adjustment not granted - We are of the opinion that this issue is no longer resintegra as this issue is covered by the decision of Coordinate Bench of this Tribunal in case of Huawei Technologies India (P.) Ltd [2018 (10) TMI 1796 - ITAT BANGALORE]as held n keeping with the OECD guidelines, endeavor should be made to bring in comparable companies for the purpose of broad comparison. Therefore the working capital adjustment as claimed by the assessee should be allowed. Refusing the risk adjustment by the Ld.TPO - The same has been rejected as relevant data in respect of the comparables were not provided by the assessee. in the event the assessee is able to establish the risks undertaken by the outstanding comparables, the same may be considered in accordance with Rule 10B by the Ld.TPO. Necessary verification may be carried out in respect of the same by the Ld.TPO. TP Adjustment only to the gross income earned by assessee on sales made to AE. - We direct the Ld.AO to verify the computation of the international transaction to the total operating cost as provided by the assessee hereinabove. In any event, the transfer pricing adjustment has to be restricted to the value of international transaction alone. The Ld.AO is directed to consider the claim of assessee in accordance with law. ALP of local sourcing support fees under the TNMM - HELD THAT:- The assessee is into wholesale and retail sales of PUMA products. The common sourcing entity globally is the PIT to all PUMA sales entities, who is assisted by PITS and WCL. PIT assists the assessee with the sourcing services, to get the products manufactured from the local third party manufacturers. The products so manufactured by the third party local manufacturers, are restricted to Indian market only. On a detailed analysis of the transfer pricing study, we note that the assessee is one of the PUMA sales entity to sell PUMA products. PIT is a medium who sources by either to manufacture or have manufactured PUMA products, which is sold to PUMA sales entities like assessee before us. There is a contractual agreement between PIT and PUMA SE(an AE who owns and provides necessary rights to use trade mark and brand name to PUMA sales entities), as per which PIT is allowed to collect R&D fees from PUMA sales entities to compensate PUMA SE for its global product creation efforts. This in our considered opinion cannot be aggregated with the trading activity of the assessee. It has been rightly segregated by the revenue authorities. However we not that the Ld.TPO/AO has not bench marked the transaction in accordance with the transfer pricing procedures. We therefore remand this issue back to the Ld.TPO to carry out necessary verification and to determine the arms length price by adopting internal CUP. Needless to say that proper opportunity of being heard must be granted to the assessee.
|