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2016 (12) TMI 236 - ITAT CHENNAIDistribution Partners (DPs) - treated as deemed AEs u/s 92A(2)(i) - TPA - Held that:- Given the fact that the assessee’s exports through the distribution part constitutes less than 5% of its entire exports, and less than 6% of its entire sales, Northstar is certainly not in a position to exercise any dominant influence, over the assessee. The assessee’s decision to accept the terms set out by Northstar, even if that be so, may be justified on account of commercial expediencies or warranted by business exigencies or may simply be compulsion of this somewhat unique and complex business model, but it cannot, by any stretch of logic, be on account of dominant influence of Northstar as a customer. It may even be a sound business strategy to accept a rather passive and back seat role, if one can term it that way, in day to day decision making under this business model, but cannot be on account of dominant influence that Northstar exercises on buying of products from the assessee. The influence of Northstar, given the scale of business through Norrthstar as a distribution part, is too modest to make it a dominant influence in the nature of control. In this view of the matter, as also bearing in mind the earlier discussions on the issue, the assessee and Northstar can not be treated as ‘associated enterprises’ under section 92 A. We uphold the plea of the assessee. Once the assessee and Northstar are held to be independent enterprise, outside the scope of Section 92A, the very basis of ALP adjustments ceases to hold good in law. The impugned ALP adjustment of ₹ 2,51,91,556 must stand deleted for this short reason alone - Decided in favour of assessee
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