TMI Blog2019 (5) TMI 1065X X X X Extracts X X X X X X X X Extracts X X X X ..... tamount to application of TNMM in an erroneous manner. This Court has already held that including the FOB value of the AE s contract in the operating cost in order to determine its margin not to be sustainable in law. The ITAT has rightly held that the TPO has artificially enhanced the cost base of the taxpayer and proposed a mark up of the FOB value of goods sourced by AEs and as such this approach is not available in TNMM under Rule 10 B(1) (e). Further, the observation of the ITAT that the TPO has wrongly recharacterized the business function of the taxpayer from a business support service provider to a trader also suffers from no legal infirmity. - No substantial question of law arises - ITA 1111/2018 and ITA 1129/2018 & CM APP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by this Court as under: This Court is of the opinion that to apply the transactional net margin method, the assessee s net profit margin realized from the international transactions had to be calculated only with reference to the cost incurred by it and not by any other entity either third party vendors or the associated enterprise. Textually, and within the bounds of the text must the Assessing Officer/ Transfer Pricing Officer operates, rule 10B (1) (e) does not enable ITA 1111/2018 connected matters Page 3 of 4 consideration or imputation of cost incurred by third parties or unrelated enterprises to compute the assessee s net profit margin for application of the transactional net margin method, Rule 10B (1) (e) recognizes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia Pvt. Ltd. (supra). In the present case as well the ITAT has followed the decision of this Court in Li Fung India Pvt. Ltd. (supra). 8. What requires to be noticed also is that in relation to this very Assessee for AYs 2011-12, 2012-13 and 2013-14, the Assessee s determination of ALP has been accepted by the Assessing Officer. This fact has been noticed by the ITAT in the impugned order for the AY in question as well. 9. This Court has already held that including the FOB value of the AE s contract in the operating cost in order to determine its margin not to be sustainable in law. The ITAT has rightly held that the TPO has artificially enhanced the cost base of the taxpayer and proposed a mark up of the FOB valu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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