TMI Blog2022 (12) TMI 670X X X X Extracts X X X X X X X X Extracts X X X X ..... he third parties, the resale price method is the most appropriate method, where the segmental results to the gross profit level are available. Direction of the learned dispute resolution panel in rejecting reliance on the decision of L Oreal India private limited [ 2015 (2) TMI 407 - BOMBAY HIGH COURT] is also not proper. The finding of the learned dispute resolution panel that in that case that assessee was engaged only in trading activities is clearly an incorrect fact recorded by the learned dispute resolution panel, which can be gathered from the coordinate bench decision reported [ 2012 (4) TMI 752 - ITAT MUMBAI] which was challenged by the revenue before the honourable Bombay High Court. Thus, in that case honourable Bombay High Court [ 2015 (2) TMI 407 - BOMBAY HIGH COURT] in case of an assessee who was engaged in the business of manufacturing and trading in cosmetics held that for the trading activities in cosmetic segment, adoption of the resale price method by the assessee was upheld. In view of this, we do not have any hesitation in accepting submission of the assessee that for benchmarking of the international transaction of trading activities where assessee impor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e international transaction under section 92 of the Act. 2. Rejection of methodical Transfer Pricing analysis and selection of Most Appropriate Method for Benchmarking Analysis On the facts and in the circumstances of the case and in law, the ld. AO/ ld. TPO erred in and the Hon'ble DRP further erred in upholding / confirming the action of the ld. AO/ld. TPO in rejecting the Resale Price Method (RPM) considered by the Appellant and selecting the Transactional Net Margin Method ( TNMM ) method, as the most appropriate method for benchmarking the international transaction of import of finished goods for distribution without providing any cogent reasons for the rejection of RPM. 3. Without prejudice erred in not appreciating the economic adjustment made due to devaluation of currency On the facts and in the circumstances of the case and in law, the Hon'ble DRP erred in not appreciating the economic adjustment made due to devaluation of Indian currency vis- -vis foreign currency as appellant majorly imports its finished goods from associated enterprises in foreign currency. 4. Without prejudice erred in not appreciating the business reasons for losses On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xico AE, assessee adopted CUP method taking the foreign AE as a tested party compared with the prices charged by the comparable companies and stated that the prices charged to the assessee is less than the price charged by them to the comparable companies and therefore same is at arm s-length. c. With respect to the transaction of import of raw material from Toreecid SA, Al fabren SA, Torrecid Suzhou, assessee adopted the foreign AES tested party adopted profit level indicator of operating profit/total cost and found that tested party results are less than the result of comparable companies and concluded that the international transactions are at arm s-length. 07. The learned Transfer Pricing Officer examined and found that assessee has not produced the audited accounts of the tested party therefore, PLI determined by assessee is not verified, and hence, benchmarking by the assessee was rejected. The learned transfer pricing officer combined the transactions of import of raw material as well as the import of finished goods and took assessee as a tested party computed margin of the assessee at (-) 8.26%, took 8 different comparables whose average margin was 14.60% and issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted the same. The reasons given by the learned Departmental Representative is that assessee is in two different segments i.e. trading as well as manufacturing. Assessee imports the furnished goods as well as raw materials from Associated Enterprises. Segmented financials are also available to the gross profit level and therefore, the Transitional Net Margin Method (TNMM) adopted by the Transfer Pricing Officer is the appropriate method. It rejected the reliance on the decision of Hon'ble Bombay High Court stating that in case of Income-tax Officer vs. L Oreal India (P.) Ltd. in ITA No. 5423/Mum/2009 dated 25 April 2012, it was having only trading business. Accordingly, it rejected the contention of the assessee that resale price method for benchmarking of transaction for import of goods for resale in Indian market is the most appropriate method. Accordingly, they upheld the adoption of TNMM method by the Transfer Pricing Officer. After considering the other objections, the directions were passed on 23 August 2017, which culminated, into an assessment order. 011. As per the direction of the Dispute Resolution Panel, the original adjustment to the Arms Length Price import of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company engaged in the manufacture of products for the ceramics and glass industry. Company purchases the finished goods for distribution in India. It also imports raw material, which is used in the manufacturing activity. The international transaction shown by the assessee as Under:- serial number nature of transaction Value of the transaction Most appropriate method selected by assessee 1 Import of raw materials from Torrecid SA , Al farben SA and Torrecid Suzhou 14,02,80,914 Transactional net margin method taking foreign associated enterprises as tested parties 2 Import of raw materials from Chilches materials SA Torrecid Maxico 74,07,971 CUP 3 Import of finished goods from Torrecid SA and Digital Services Ceramics SL 29,09,58,928 Resale price method taking assessee as a tested party 015. Now there is no dispute with respect to the benchmarking of transaction state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee was upheld. It also rejected the reliance on the decision of the honourable Bombay High Court stating that assessee was only having trading business in that decision whereas in the issue before them, in the present assessee s case it is engaged in trading as well as manufacturing activity. We find that when the learned dispute resolution panel has concluded that assessee is engaged in two different segments (1) trading, (2) manufacturing segment. The details with respect to the gross profit level are available as depicted from the segmental accounts produced. Therefore, when it is claimed undisputedly by the assessee that with respect to the trading of goods, assessee does not undertake any value addition, we failed to understand the reasoning given by the learned dispute resolution panel in rejecting the resale price method as most appropriate method and upholding transactional net margin method. According to rule 10 B (1) (b) resale price methods is the method where the normal gross profit margin earned by a tested party is required to be compared with comparable uncontrolled transactions. When undeniably assessee is selling the goods imported from associated ente ..... X X X X Extracts X X X X X X X X Extracts X X X X
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