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2021 (8) TMI 1361 - AT - Income TaxTP adjustment - MAM selection - determination of ALP in respect of the international transaction of purchase of stock - in- trade by the Assessee from its AE - assessee aggregated and benchmarked the transactions of purchase of consumables, raw materials, stock-in-trade and capital assets by selecting Cost Plus Method (CPM) as Most Appropriate Method (`MAM') and the overseas AE as tested party - Assessee submitted that the TPO ought not to have rejected the claim of the Assessee that RPM was the MAM for determination of ALP - HELD THAT:- A method for determining arm’s length price, to be held as a ‘most appropriate method’ (MAM), should be, as provided in rule 10C(1). A method "which is best suited to the facts and circumstances of each particular transaction" and a method and "which provides the most reliable measure of arm’s length price of the international transaction" Under rule 10C(2)(c), "the availability, coverage and reliability of data necessary for application of the method" is one of the crucial factors determining suitability of a method of determination of arm’s length price in a particular fact situation. Similarly, it is also important to determine whether accurate adjustments can be made for the differences between the international transactions and the comparable uncontrolled transactions, and unless such adjustments can be made the related method cannot be said to be most appropriate method. Determination of ALP on the basis of facts and circumstances and as per the requirements of the relevant statutory provision is mandatory and cannot be accepted owing to default. We therefore set aside the order of the AO/TPO on the issue and the directions of the DRP on the issue and remand the issue to the DRP for passing a speaking order after meeting the specific objections raised by the Assessee. The relevant grounds of appeal being Gr.No.1 to 12 are accordingly treated as allowed for statistical purpose. Disallowance of reimbursement of expenses by invoking the provisions of Sec.40(a)(ia) - submission of the Assessee on the aforesaid disallowance was that the reimbursements were purely on a cost to cost basis and there was no margin whatsoever and therefore there was no question of deduction of tax at source on such reimbursements - HELD THAT:- We are of the view that the DRP fell into an error in refusing to examine the plea of the assessee that the sum paid were mere reimbursement with no element of income by following the decision of Transmission Corporation AP Ltd. [1999 (8) TMI 2 - SUPREME COURT]. The said decision has been explained in a later decision in the case of GE Technologies [1999 (8) TMI 2 - SUPREME COURT] and in terms of the said judgment the chargeability of the sum paid in the hands of the recipient has to be gone into. If the payments were mere reimbursement, then there would not no income chargeable in the hands of the recipient and hence no requirement of deduction of tax at source. Since this exercise is required to be carried out by the DRP, we deem it proper to remit this issue also to the DRP. Admission of additional ground - Assessing Officer computing total income without adjusting the declared loss - HELD THAT:- Additional grounds of appeal raise questions of law, which can be decided on the basis of material available on record. The omission to raise the aforesaid grounds of appeal is bonafide. In view of the decision of the Hon'ble Supreme Court in the case of National Thermal Power Co Ltd [1996 (12) TMI 7 - SUPREME COURT] and Jute Corporation of India [1990 (9) TMI 6 - SUPREME COURT] and the discretion vested in your Honours under Rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963, the additional grounds of appeal is admitted for adjudicated on merits. Merits of the claim made in the additional ground is concerned, the issue requires examination by the AO when he gives effect to the order. Ends of justice will be met, if the AO is directed to consider the claim of the assessee and if found correct give appropriate adjustment to the total income.
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