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2024 (4) TMI 253 - AT - Income TaxTP Adjustment - selection of most appropriate method (MAM) - Resale Price Method or Transactional Net Margin Method - Introduction of Fresh Comparables - Removal of 3% Filter - it is also the claim that if the Transactional Net Margin Method is applied PLI of the assessee is 6.12% and PLI of the comparable is 5.41% and even otherwise no adjustment can be made. HELD THAT:- In subsequent years the assessee itself has adopted the transactional net margin method as the most appropriate method. CIT – A held that resale price method is the most appropriate method but looking at the subsequent adoption of most appropriate method of transactional net margin method by the assessee itself, he computed the arm's-length price of the international transaction adopting the transactional net margin method. Therefore now the grievance of the learned assessing officer that the learned CIT – A has held that the resale price method is the most appropriate method does not hold any water. Further we also do not decide ground number A of the appeal of the AO whether in such case what should be the most appropriate method as the method adopted by the learned transfer pricing officer of transactional net margin method has been upheld for deleting the addition by the learned CIT – A. While computing the arm's-length price adopting the transactional net margin method, nine comparables were selected whose average PLI of operating profit/sales was 5.41% and the assessee's margin was 6.12%, the addition was deleted. DR objection is that the comparable is introduced by the assessee before theCIT – A where in some of the cases very low margin of 1% and 2% is shown and therefore such low margin entities could not have been selected. However, he could not show that those entities are functionally not comparable with the assessee. May be in the comparability analysis some of the companies may have a lower margin but those have to be included in the comparability analysis if they are functionally comparable with the functions of the assessee. No infirmity in the order of the CIT – A in deleting the addition of adjustment in arm's-length price of international transaction - Decided in favour of assessee.
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