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2018 (11) TMI 265 - AT - Income TaxTPA - selection of MAM - application of the Transactional Net Margin Method (TNMM) in respect of its international transaction of trading activity as against Resale Price Method (RPM) as the most appropriate method - Held that:- The Tribunal in assessment years 2009-10, 2010-11 has approved the application of the RPM as most appropriate method. In doing so, it also relied on the order passed by it for the assessment year 2008-09. The Ld. DR failed to point out any distinguishing feature in the international transaction under dispute for the year under consideration vis-à-vis the preceding years. Respectfully following the precedents, we hold the RPM to be the most appropriate method in respect of distribution activities undertaken by the assessee under the international transaction of `Import of finished goods’. Accordingly, the impugned order is overturned to this extent. Non ranting functional adjustment relating to foreign exchange (forex) loss - Held that:- The amount of foreign exchange gain/loss arising out of revenue transactions is required to be considered as an item of operating revenue/cost, both for the assessee as well as the comparables. The ground taken by the assessee is, therefore, dismissed. Not allowing import duty adjustment - Held that:- Whether the import duty has been paid or not or paid to lower extent by the comparables cannot have any effect over computation of gross profit margin of the comparables. If the assessee has made costly purchases, it will naturally earn more revenue from the sales as well. One can compare apple with apple and not with orange. If purchase of goods is of higher quality and costly, it is but natural that the sale will also be correspondingly at a higher price. It is impermissible to claim that the amount of higher import duty paid by the assessee should be adjusted in isolation without having effect on the higher sales price realized from the sale of such imported goods. Once we take figure of gross profit, it takes into account not only the higher debit side of cost of purchases but also the higher credit side of the revenue earned from sales. No adjustment on account of separate items resulting into the computation of gross profit can be permitted. In our considered opinion, the stand taken by the assessee for allowing separate adjustment in respect of higher custom duty paid by it has been rightly rejected in the first appeal. Exclusion of Roselabs Limited and Novartis India Limited from its list of comparables and inclusion by the TPO of Mankind Pharma Limited as a comparable company - Held that:- Following the view taken by the Tribunal in its order for the preceding year in the case of the assessee itself, we set aside inclusion/exclusion of the two companies mentioned above and remit the matter to the file of Assessing Officer/TPO for examining their comparability or otherwise afresh after allowing a reasonable opportunity of hearing to the assessee. Granting benefit ±5% margin to the assessee in determining the ALP - Held that:- it is found that the Ld. CIT(A) granted the benefit of ±5% without any standard deduction in view of the amendment to Section 92C(2A) by the Finance Act, 2012 with retrospective effect. In view of legislative amendment carried out retrospectively, the assessee cannot claim any standard deduction. We, therefore, hold that ld. CIT(A) was justified in giving benefit of ±5% on individual basis without any standard deduction.
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