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TMI Blog2022 (9) TMI 1505X X X X Extracts X X X X X X X X Extracts X X X X ..... products. The assessee is a wholly owned subsidiary of Puma Austria and is a licensed distributor engaged in the wholesale trading of group projects/merchandise including footwear, apparel and accessories. The assessee filed return of income for AY 2015-16 on 29.11.2015 declaring total income of Rs.46,77,94,170/- The case was selected for scrutiny and reference was made to the Transfer Pricing Officer (TPO) to determine the arm's length price (ALP) of the international transactions the assessee had with its associated enterprises (AE). The AO determined a TP adjustment of Rs.6,65,42,022/-. Aggrieved, the assessee raised its objections before the DRP. 3. The DRP vide its directions dated 27.09.2019 directed the TPO to exclude the liabilitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reply, both sides agreed to this proposition but this was the common request of both sides that all aspect of the matter about T P adjustment should be left open for a fresh decision by DRP." 4. The DPR in the remand proceedings vide order dated 25.01.2022 retained the same TP adjustment as in the earlier round. The assessee is now in appeal against the order giving effect to the order of the ITAT. 5. The assessee raised 13 grounds of appeal. During the course of hearing the learned A.R. submitted that out these grounds he is contending only the following issues with regard to TP adjustment: i. Exclusion of Metro Shoes Ltd. ii. Exclusion of Sreeleathers Ltd. iii. Margin correction of VF Brands India Pvt. Ltd. and Tommy Hilfiger Arvi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O rejected the comparable companies chosen by the assessee and proceeded to select fresh set of comparable companies by applying different filters. The final set of comparable companies, selected by the TPO the mean margin of which worked to be 12.63%. is given in the table below : - Sr.No Company Name Weighted PLI for three Years (OP/OR) (%) 1 Metro Shoes Ltd. 13.78 2 V F Brands India Pvt. Ltd. 14.56 3 Tommy Hilfiger Arvind Fashion Pvt. Ltd. 8.24 4 Solace Fashon Pvt. Ltd. 8.81 5 Sreeleathers Ltd. 17.76 Mean 12.63 Accordingly the TPO computed the ALP of the assessee as under: - Particulars Amount of International Transaction Purchases of materials and consumables 104,03,32,387 Payment of Sourcing Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be noted that both the TPO and the assessee were in consensus on not applying the wholesale/retail filter to filter out companies. Hence, the assessee contention that the company has both wholesale and retails wings is not valid and accordingly the plea of the assessee is rejected. 10. With regard to the exclusion of Metro Shoes Ltd., he learned A.R. submitted that the company does not pass the more than 75% filter applied by the TPO indicating that it has a small portion of manufacturing income. The learned A.R. further submitted that the Metro Shoes has paid excise duty under Central Excise Act, 1949 thereby highlighting that the company is engaged in manufacturing activity and there is no segmental bifurcation between trading and manuf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that Metro Shoes fails the trade filter of more than 75% and therefore should be excluded from the comparable companies. 13. With regard to the exclusion of Sreeleather Ltd: the learned A.R. contended that Sreeleather Ltd. is engaged in both wholesale and retail trading of footwear and leather articles. The learned A.R. drew our attention to the financials of the company for FY 2014-15 (page 1973 of the paper book III) wherein out of the total turnover of the company 66.76% is derived from retail trading activity and only 12.78% is derived from wholesale trading activity. The learned A.R. therefore contended that the assessee who is into wholesale trading business cannot be compared with Sreeleather Ltd. whose major income is from retail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2323 66.76% 3. Leather Goods for Accessories 52324 20.46% 16. We also notice that the assessee has raised this contention before the DRP which is not been considered by the DRP by stating that it is not valid since the TPO and the assessee were in consensus in not applying the wholesale retail filter. In view of the above and considering the provisions contained in Rule 10B (2)(d) we are of the considered view that Sreeleather Ltd. should be excluded as comparable. 17. With regard to India VF Brands Pvt. Ltd. and Tommy Hilfiger Arvind Fashion Pvt. Ltd. the learned A.R. submitted that the margin considered by the TPO for these companies are not correct. The learned A.R. also submitted the working with regard to the correct margin of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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