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2015 (10) TMI 2790 - AT - Income TaxTP Adjustment - Determination of ALP under TNMM - MAM selection - Accurate adjustments if CUP method is followed - HELD THAT:- There are a number of differences in the international transaction and the non AE export rates considered by the TPO for comparability analysis. As put forth by the assessee, these differences, inter alia, include impact due to adopting simple average instead of weighted average, quantity based price variation, quality based price variation, analysis cost absorption based price variation, market based price variation, key customer based price variation, forward contract based price variation etc. These differences materially affect the computation of ALP of the international transaction. Even though the assessee has computed the adjustments to be given for these differences, the same will not make the ‘Internal CUP’ as the most appropriate method. Reasonably accurate adjustments cannot be made to eliminate these differences. Internal CUP fails to be a most appropriate method on the basis of facts and circumstances of the case and law applicable. DRP as to how TNMM is the most appropriate method. As rightly observed by the DRP, TNMM requires establishing comparability at a broad functional level. It requires comparison between net margins derived from the operation of the uncontrolled parties and net margin derived by an associated enterprise on similar operation. The assessee in the present case has chosen comparables in the similar industry under the TNMM. The DRP had directed the TPO to make comparability analysis under the TNMM and subsequently the TPO has not determined any TP adjustment thereby concluding that the international transactions are at ALP even under the TNMM. As concluded that the TNMM is the most appropriate method. The assessee has relied on various decisions in support of the proposition that accurate adjustments should be given if CUP method is followed. Regarding adjustments to be given under the internal CUP. Since it is held that TNMM is the most appropriate method on the basis of facts and circumstances of the case and law applicable, the decisions relied on and the assessee’s cross objections are not being dealt.
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