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2023 (10) TMI 1057 - AT - Income TaxTP Adjustment - MAM selection - substantive adjustment made using the CUP Method pertaining AE’s other than Sumitomo Corporation, Japan - assessee use of Transactional Net Margin (“TNMM”) with operating profit/operating expenses (“OP/OPEX”) as the profit level indicator (“PLI”) has been disregarded by the TPO/DRP - HELD THAT:- It is found that in Assessee’s own case in the consolidated order [2018 (10) TMI 1785 - ITAT DELHI] and other connected Appeals, (Sumitomo Corporation India Ltd. Vs. ACIT [2018 (10) TMI 1785 - ITAT DELHI], the Coordinate Bench has held that owing to significant differences between the AE and non AE commission transactions in respect of the nature of the goods, volume of transaction and the geographical locations of the markets, average commission rate in the non-AE segment could not be adopted as the ALP for the commission rate of numerous products in the AE segment under CUP method, which warrants a very high degree of similarity between controlled and uncontrolled transactions. Thus we hold that once TNMM has been accepted under the similar FAR, there is no reason to deviate by adopting CUP Method and other methods admittedly are incapable of capturing the true arm's length result and therefore, we hold that TNMM should be taken as a most appropriate method for benchmarking the said transaction. Accordingly, we are inclined to allow the Grounds of Appeal No. 4, 6 & 7 for statistical purpose and remand the issue to the file of Ld. TPO to examine and bench mark the integration transaction by adopting as most appropriate method by taking ‘Berry ratio’ as PLI as has been approved by Hon’ble High Court. Protective addition under TNMM applying PLI of OP/OPEX - TPO while making the adjustment included the FOB value of the goods transacted under indenting segment in the cost base as well as part of opening revenues of the assessee - HELD THAT:- By respectfully following above said ratio laid down by the Tribunal in earlier years [2021 (11) TMI 1173 - ITAT DELHI] we are of the opinion that FOB value of the goods is the cost and revenue of the buyer and the seller and not the commission agent. Therefore, such an adjustment could not have been made. Comparable selection - assessee submitted that the assessee in TP report selected 8 comparable companies, but the TPO has rejected all the 8 comparables and selected fresh comparable set off 8 new Companies - HELD THAT:- Since, the assessee has provided the details of the above said 8 Companies in the TP Study; the Ld. TPO/DRP ought to have analyzed the same in detail. Likewise, the TPO/DRP ought to have given clear finding as to how the above 3 companies selected by the TPO are comparable to the FAR of the Assessee. Therefore, we deem it fit to direct the DRP to consider the above 8 Companies selected by the assessee along with the three comparable companies selected by the TPO on the basis of FAR analysis of the assessee and decide afresh by giving cogent reasons. DRP is further directed to pass a speaking order on those comparable after giving proper opportunity of being heard to the assessee.
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