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2022 (12) TMI 1073 - ITAT MUMBAITP adjustment - Selection of MAM - rejecting RMP - value of international transactions pertaining to the import of spare parts and cranes/ machines for trading purpose entered - Non granting the excise duty adjustment and closing stock adjustment sought - HELD THAT:- Appellant had received service commission from AEs in Austria, Germany, France and Switzerland under separate contracts. The international transactions under consideration are of different nature. In the two immediately preceding assessment years the appellant had furnished segmental working for commission segment, service segment and trading segment, and the International Transactions pertaining to trading segment were benchmarked using RPM. Vide Letter, dated 28.10.2015, filed during the assessment proceedings the Appellant has expressed the apprehension that reliable data may not be available from publicly available database to facilitate application of RPM and that hidden differences in accounting of direct costs can lead to distorted results. Given the fact that the Appellant had adopted RPM in the immediately two preceding assessment years and not faced such hindrances, we are not persuaded to accept the aforesaid apprehension of the Appellant as a genuine reason for rejecting RMP Trading segment of the Appellant involves import of spares and machinery from AEs for sale to customers in India without making any value addition. The Appellant had adopted RPM as most appropriate method for benchmarking international transactions pertaining to trading segment during the Assessment Year 2010-11 and 2011-12. It is admitted position that there is no change in the facts and circumstances during Assessment Year AY 2012-13 as compared to AY 2010-11 and 2011-12. Revenue was justified in rejecting the aggregation approach adopted by the Appellant and in adopting RPM to benchmark international transactions pertaining to trading segment. Economic adjustments sought by the Appellant - We are of the view that the TPO/AO/DRP were correct in rejecting the same as the Appellant has failed to establish how the economic adjustments claimed by the Appellant could “materially affect‟ the amount of gross profit margin in the open market as per the requirements of Rule 10B(1)(b) of the Income Tax Rules, 1962. Impact of the custom duty adjustments and closing stock adjustment sought by the Appellant can be discerned on the basis of the standalone computation provided by the Appellant. Further, as rightly noted by the DRP, closing stock adjustment claimed by the Appellant was not required in view of the fact that the financials of the Appellant as well as the comparable companies were prepared in accordance with the Accounting Standard – 2. Where the higher import content is reflective of the difference in business models of the assessee and the comparables, adjustments can be made for functional differences. Therefore, in our view, the DRP was justified in not granting the excise duty adjustment and closing stock adjustment sought by the Appellant. Deduction as travelling and conveyance expenses - We note that during the assessment proceedings for relevant assessment year disallowance of 100% of travelling and conveyance expenses has been made in identical facts and circumstances. In appeal for the earlier years such disallowance has been restricted to 10% of the travelling and conveyance expenses by the Tribunal - Thus we restrict the disallowance of travelling and conveyance expenses to 10% of the amount debited to Profit & Loss account during the relevant previous year. Appeal filed by the Appellant is partly allowed.
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