Del. HC Stresses Mandatory Legal Assistance to Preserve Fairness and Integrity of Criminal Trials  ||  Supreme Court: Delhi High Court Ruling upheld on Taekwondo National Sports Federation Recognition  ||  SC: Blockchain-Based Digitisation of Land Records Necessary to Reduce Property Document Litigation  ||  Supreme Court to NCLT : Limit Power to Decide Intellectual Property Title Disputes under IBC  ||  Bombay HC: Railway Employee With Valid Privilege Pass is Bona Fide Passenger Despite Missing Entries  ||  Delhi High Court: Mere Pleadings Made To Prosecute or Defend a Case Do Not Amount To Defamation  ||  Delhi High Court: Asking an Accused To Cross-Examine a Witness Without Legal Aid Vitiates The Trial  ||  Delhi High Court: Recruitment Notice Error Creates No Appointment Right Without Vacancy  ||  Supreme Court: Subordinate Legislation Takes Effect Only From its Publication in The Official Gazette  ||  Supreme Court: DDA Must Adopt a Litigation Policy To Screen Cases and Avoid Unnecessary Filings    

Deputy Commissioner Of Income Tax vs. Franke Faber India Pvt. Ltd, Pune - (Income Tax Appellate Tribunal) (01 Aug 2022)

Transfer pricing adjustment should be restricted only to the international transactions and not the entity level transactions

MANU/IP/0499/2022

Direct Taxation

In facts of present case, the assessee filed its return declaring loss of Rs.1.55 crore. Certain international transactions were reported in Form No.3CEB. The Assessing Officer (AO) made a reference to the Transfer Pricing Officer for determining the Arm's Length Price (ALP) of the international transactions. Present Tribunal is concerned only with the transactions of Purchase of raw materials, Purchase of traded goods and Sale of finished goods, which have been clubbed by the assessee under the head "Manufacturing Function".

The AO did not dispute the applicability of the Transactional Net Margin Method (TNMM) as the most appropriate method. Out of four comparables chosen by the assessee, the TPO excluded Gorani Industries Limited and worked out the adjusted arithmetic mean of the Operating Profit/Operating Revenue of the remaining companies at 6.16%. Applying it as arm's length margin, the TPO worked out the transfer pricing adjustment at Rs.7,30,13,424. The learned CIT(A) directed to include GIL in the list of comparables, against which the Revenue has come up in appeal.

The issue of restricting the transfer pricing adjustment to the extent of international transactions rather than the entity level is no more res integra in view of several judgments rendered by various higher forums including the Hon'ble jurisdictional High Court in CIT Vs. Phoenix Mecano (India) Pvt. Ltd. holding that the transfer pricing adjustment should be restricted only to the international transactions and not the entity level transactions. The High Court in has held that the transfer pricing adjustment made at entity level should be restricted to the international transactions only. The impugned order is set aside and it is directed that the transfer pricing adjustment should be restricted only to the extent of the international transactions.

The impugned order on the issue of transfer pricing adjustment of the international transactions of Purchase of Raw Material, Purchase of traded goods and Sale of finished goods is set aside and the matter is remitted to the file of the AO/TPO for a fresh determination. Assessee will be allowed reasonable opportunity of hearing in fresh proceedings. Appeal the Revenue is allowed and the cross objection of the assessee is partly allowed.

Tags : ASSESSMENT   TRANSFER PRICING   INTERNATIONAL TRANSACTION  

Share :        

Disclaimer | Copyright 2026 - All Rights Reserved