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TMI Blog2018 (6) TMI 1232X X X X Extracts X X X X X X X X Extracts X X X X ..... ts through retail by way of directly owned and managed outlets. It is a 51:49 joint venture between Burberry International Holdings Ltd UK and Genesis Colours Private Limited, India. 3. For the assessment year 2012-13 the assessee filed their return of income on 30/11/2012 declaring loss of Rs. 1,80,33,018/-. During the course of assessment proceedings, Ld. AO noticed that the assessee had undertaken international transactions with its associated enterprises as such in accordance with the provisions of section 92 CA of the Income Tax Act, 1961 he referred the determination of the arm's length price to the Transfer Pricing Officer (Ld. TPO). The assessee has benchmarked international transaction relating to import of finished goods using CUP corroborated by RPM as the most appropriate method by using the multiple year Data and claimed the transaction to be at arm's length. The gross profit rate of the assessee was 54.96% and the net profit rate was (-)14.73%. 4. Ld. TPO, however, benchmarked the international transaction using TNMM is the most appropriate method and OP/OC as the PLI, and computed the adjustment under section 92 CA at Rs. 6,94,58,591/-which are subsequently rectifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se Corporation India (P.) Ltd. v. ACIT [2017] 77 taxmann.com 194 (Delhi - Trib.), Horiba India Pvt. Ltd. vs. Deputy Commissioner of Income Tax [2017] 81 taxmann.com 209 (Delhi - Trib.), Assistant Commissioner Of Income Tax vs. Kobelco Construction Equipment India Limited [2017] 81 taxmann.com 31 (Delhi - Trib.), Oriflame India (P.) Ltd. v. ACIT [2017] 85 taxmann.com 162 (Delhi - Trib.), DCIT v. Delta Power Solution India (P.) Ltd. [2016] 68 taxmann.com 247 (Delhi - Trib.), Luxottica India Eyewear P.Ltd. vs Department Of Income Tax (ITA No. 1115/Del/2014 and 617/Del/2014), ACIT vs Akzo Nobel Car Refinishes India (P.) Ltd [2017] 84 taxmann.com 199 (Delhi - Trib.), Nokia India Pvt. Ltd. v. Deputy Commissioner of Income-tax, Circle -13(1), New Delhi [2014] 52 taxmann.com 492 (Delhi - Trib.), and Danisco (India) Pvt. Ltd. Vs. ACIT [2014] 48 taxmann.com 60 (Delhi - Trib.)/[2014] 151 ITD 460 (Delhi - Trib.) for the principle that when the reseller does not add any value to the product of the goods, the RP method would be appropriate for determining the arms' length price. 9. Further by placing reliance on the decisions in Assistant Commissioner Of Income Tax vs. Kobelco Construction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 015 (2015) 45 CCH 0098 Bang Trib at page 13 where was held that if the comparables are not found appropriate, fresh comparables can be searched, but the method adopted need not be rejected. 13. DR placed reliance on the observations of the Ld. TPO, vide comment of the TPO. He brought to our notice that the Ld. TPO found that certain expenses like salaries and wages, travelling and conveyance, etc., which are directly connected with selling and distribution functions as could be found from the profit and loss account of the assessee or in the case of the comparables have not been considered a compatibility, as such the manner in which the RPM has been applied was not giving a picture of the compatibility analysis is For application of the RPM method these factors cannot be ignored at all. 14. Ld. DR further submitted that as rightly observed by the Ld. TPO, for achieving proper compatibility in the light of above mentioned aspects of business of a distributor, it is simply clear that complete information about business profile and financial data is available in respect of all the parties which are examined as comparables, which is not found in public domain, as such, RPM is reject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RPM is best suited for determining ALP of an international transaction in the nature of purchase of from an AE which are resold as such to unrelated parties. Ordinarily, this method pre-supposes no or insignificant value addition to the goods purchased from foreign AE. 17. While noting the above decision also, Hon'ble jurisdictional High Court, in Principal Commissioner of Income-tax-6 v. Matrix Cellular International Services (P.) Ltd. [2018] 90 taxmann.com 54 (Delhi) found that, - 8. This Court finds that once the ITAT, on considering the relevant facts as well as the order of the TPO, had concluded that the business of the assessee was merely that of a pure trader, and there was no value addition made before reselling the particular products (i.e. the SIM cards), its consequent finding that RPM is the Most Appropriate Method, is irreproachable. In Nokia India (P) Ltd. v. Deputy Commissioner of Income Tax, (2015) 167 TTJ (Del) 243, the Delhi bench of the ITAT held: "A close scrutiny of the above two sub-clauses along with the remaining sub-clauses of r. 10B(1)(b) makes it clear beyond doubt that RPM is best suited for determining ALP of an international transaction in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Additional Commissioner of Income Tax, (2016) 381 ITR 227 (Del), while considering the decision of this Court in Sony Ericsson Mobile Communications India Pvt. Ltd. v. Commissioner of Income Tax, (2015) 374 ITR 118 (Del), noted that: "The RP Method loses its accuracy and reliability where the reseller adds substantially to the value of the product or the goods are further processed or incorporated into a more sophisticated product or when the product/service is transformed." 12. Therefore, a contrario, when the reseller does not add any value to the product of the goods, the RP method would be appropriate for determining the arms' length price. 18. In respect of the observations of the Ld. DRP that the assessee has incurred substantial AMP, and other expenses, in relation to its turnover, and is therefore, not a simple distributor in terms of the requirement of using RPM, Ld. AR has rightly placed reliance on the decision reported in Nokia India Private Limited vs. DCIT (2015) 153 ITD 508 (Delhitrib. ) wherein it was held that the incurring of high advertisement and marketing expenses by the assessee vis-avis the other comparable companies does not in any manner affec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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