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2021 (11) TMI 1132 - AT - Income TaxTP adjustment - international transaction pertaining to purchase of traded goods - selection of MAM - HELD THAT:- We have also perused the order of the coordinate bench in assessee’s own case in earier years. We appreciate the arguments of the parties with respect to the risk assumed by the normal distributor as well as the risk assumed by the assessee. However we find that the issue is squarely covered by the decision of the coordinate bench in assessee’s own case [2018 (7) TMI 2083 - ITAT DELHI] findings returned by TPO/DRP that the taxpayer being a full-fledged risk bearing distributor performing numerous functions, RPM is not the MAM, is not sustainable for the reason that in a comparable uncontrolled transaction, normally distributor requires to carry out all the functions necessary to enhance the sales like market research, inventory risk, credit risk etc.. In such circumstances, no comparable instances have been brought on record by the TPO/DRP. When finished goods purchased by the taxpayer are resold in the market without any value addition, then gross margin earned on such transaction is the only determinative factor to analyse gross compensation after the cost of sale. So, we are of the considered view that RPM in this case is the MAM to bench mark the international transactions. In these circumstances, addition made by the TPO/AO merely by disputing the method applied by the taxpayer is not sustainable in the eyes of law. Method for benchmarking the international transaction cannot be changed merely because of the fact that the taxpayer has suffered loss at the net level but has positive gross profit in trading segment as it depends on host of circumstances. We allow ground of the appeal of the assessee and direct the ld TPO to adopt the resale price as the most appropriate method and compute the difference in ALP thereafter. TPO is directed to examine the transfer pricing analysis and decide the issue afresh.
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