TMI Blog2020 (1) TMI 128X X X X Extracts X X X X X X X X Extracts X X X X ..... of being heard to the taxpayer. So, Ground No.3.2 is determined in favour of the taxpayer. Adjustment to the entire income of the taxpayer and not confined to the addition of the international transactions as mandated by law - HELD THAT:- In view of the settled principle of law that transfer pricing adjustment is required to be restricted to the amount of international transactions only and not to the entire income of the taxpayer, the TPO is directed to make the adjustment accordingly. - Decided in favour of assessee - ITA No.2719/Del./2014 - - - Dated:- 31-12-2019 - Shri N.K. Billaiya, Accountant Member And Shri Kuldip Singh, Judicial Member For the Assessee : Shri G.C. Srivastava, Advocate, Shri Parichay Solanki, CA, Shri Mayank Patawari, CA For the Revenue : Shri Sanjay I. Bara, Senior DR ORDER PER KULDIP SINGH, JUDICIAL MEMBER Appellant, M/s. Alcoa India Private Ltd., (hereinafter referred to as the taxpayer ) by filing the present appeal sought to set aside the impugned order dated 28.02.2014 passed by the AO in consonance with the orders passed by the ld. DRP/TPO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Associated Enterprises (AE). It is also having trading segment that procures goods from its AE for the purpose of resale to other parties in India. The taxpayer is a subsidiary company of Aloca International Holding Company, USA. During the year under assessment, the taxpayer entered into international transactions with its AE as under:- Nature of transaction Method Value (INR) Import of goods RPM 174,911,076 Payment of Royalty CUP 1,353,527 Business Auxiliary Services TNMM 99,625,479 Reimbursement of expenses paid 19,495,097 Payment of networking support services other services CUP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19.97 Manak Overseas Ltd. 12.69 MKJ Enterprises Ltd. 37.90 Modern India 9.29 Bhagwandas Metals Ltd. 0.83 SKM Steels Ltd. 8.33 Average 13.84 6. Ld. TPO proceeded to compute the arm s length value of the international transactions entered into by the taxpayer with its AE as under :- Sales 226,261,335 Arms length margin 13.84 Operating Profit a ALP 31,314,569 Operating profit of assessee 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... market and also performs functions such as customers identification, meeting with customers, demonstrate the product utility etc., undertakes price negotiation with the customers and decided upon the financial terms of sales with them; and that the taxpayer maintains finished goods inventory and performs services related to the inventory control in India and thereby lot of intangibles are being added to the goods. Ld. TPO has also not opted for resale price method to determine the ALP of international transaction on the ground that financial data is not available in the public domain in case of business of a distributor, RPM is rejected and TNMM is considered as the MAM; that there are certain third party expenses made by the taxpayer as per profit loss account like salaries and wages, travelling and conveyance, freight outward expenses which are directed connected with the selling and distribution functions which have not been considered by the taxpayer in its own case nor in case of comparables for comparability. 14. On the other hand, it is the categoric case of the taxpayer that since it is engaged in procurement of aluminum goods e.g. fasteners, sheets, ext ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich resale the goods after purchasing from its AE without any value addition. Reasons for rejection of RPM applied by the taxpayer given by the ld. TPO are generic in nature. When apparently there is no value addition to the goods purchased and resold by the taxpayer, RPM is the MAM. Not an iota of evidence is there on the file if the taxpayer has made any value addition to the goods purchased from the AE before the reselling the same to the third party or has created any intangible in favour of AE. 18. Coordinate Bench of the Tribunal decided the identical issue as to RPM vs. TNMM as the MAM in case of a trader who purchases and sells the goods in case of M/s. Luxottica India Eyewear Pvt. Ltd. (supra), which has been affirmed by the Hon ble High Court in ITA 852/2015 by returning following findings :- 10.4. As the undisputed fact is that the functional profile of the assessee is that of a trader and as the characterisation of the transaction is purchase and sale of goods, we hold that RSPM is the MAM by applying the following decisions of the Co-Ordinate Bench of the Tribunal. (i) In the case of Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the assessee and discussing their submissions in the order and reasons, if any, for not agreeing or agreeing with them. It is ordered accordingly with direction to the Ld.TPO to: a) first examine as to whether, was there any value addition on imported goods, and if answer is in negative then apply RPM as a most appropriate method for trading transactions of imported goods and in consequence examine the application of appropriate method as commission payment; (iv) Frigoglass India P.Ltd. (ITA no.463/Del/2013), it is held as follows: We have heard the rival contentions and perused the material available on record. In our considered view, once assessee has given a methodology for working of ALP on selection of a particular method supported by appropriate comparables, the working can be dislodged by TPO on the basis of cogent reasons and objective findings. In this case except theoretical assertions and generalized observations, no objective findings have been given to come to a reasoned conclusion that assessee's adoption of CPM for manufacturing segment and RPM for trading segment was Factually and objectively n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the above discussion, we direct the TPO to adopt RSPM as the MAM in this case. 19. Similarly, coordinate Bench of the Tribunal in case of Swarovski India Pv.t Ltd. vs. ACIT (TS-94-ITAT-2017 (Del.)-TP) also held the RPM as the MAM for determining ALP of international transactions of import of goods from AE and resale as such by returning following findings :- It is clear from the command of sub-clause (i) itself that the RPM is applied when the property purchased by the assessee is resold as such. Sub-clause (ii further provides for choosing comparable cases in which similar property is purchased and resold. Thus it is apparent that this method, by its very language, is applicable where a property purchased from an AE is resold as such. Where, however, some value addition is made to the goods before resale, the RP M ceases to be an unfailing method. Adverting to the facts of the instant case, we find that the assessee purchased Crystal goods and Crystal components from its AE. No value addition was made to such imports. The goods were sold as such. In the given circumstances, the RPM is the most appropriate method f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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