| The Tax Publishers2020 TaxPub(DT) 0760 (Del-Trib) INCOME TAX ACT, 1961
Section 92C
In absence of working of net profit margin of internal comparables for inbound and outbound services, the issue as to benchmarking the international transactions could not be decided, however, the assessee came up before Tribunal with segmental account in tabulated form, which was required to be examined by TPO to benchmark the international transactions, therefore, the matter was remanded to the TPO with a direction to benchmark the international transactions by applying TNMM on the basis of internal comparables in view of working supplied by the assessee.
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Transfer pricing - Computation of ALP---Selection of comparables - Absence of working of net profit margin of internal comparables for inbound and outbound services - Remand
Assessee-company entered into international transactions with its AE. In order to benchmark its international transactions for outbound travel related services, it applied internal Resale Price Method (RPM) with GP/Sales in AE segment at 9.66% and GP/Sales in non-AE segment at 10.29%. Further, in order to benchmark its international transactions qua inbound travel related services, it applied internal cost plus method with GP/Sales in AE segment at 14.33% and GP/Sales in non-AE sales segment at 14.66%. TPO, however rejected the assessee's approach and applied external Transactional Net Margin Method (TNMM), selected 2 comparables and ultimately arrived at average gross profit margin with GP/Sales of those 2 comparables at 3.93% as against net profit margin of the assessee at (-) 2.48% and consequently made upward adjustment on account of ALP of international transactions of inbound and outbound services. Further, CIT (A) upheld the order of the AO. Held: On examining the order passed by CIT(A), it came on record that, “during appellate proceedings, the assessee failed to provide working of net profit margin for 2 segments, i.e., outbound and inbound travel related services, however, on combined basis, i.e., AE as well as non-AE transactions taking together nor separately for AE and another party from which internal comparables could be examined on TNMM for inbound and outbound servicesâ€. Thus, in absence of working of net profit margin of internal comparables for inbound and outbound services, the issue as to benchmarking the international transactions could not be decided. However, the assessee came up before Tribunal with segmental account in tabulated form, which was required to be examined by the TPO to benchmark the international transactions. Therefore, the matter was remanded to the TPO with a direction to benchmark the international transactions by applying TNMM on the basis of internal comparables in view of working supplied by the assessee.
REFERRED : DCIT v. Destination of the World (Subcontinent) Pvt. Ltd. 2014 TaxPub(DT) 3704 (Del-Trib) Destination of the World (Subcontinent) Pvt. Ltd. v. Asstt. CIT [ITA No. 5534/Del/2010, dt. 8-7-2011]
FAVOUR : In assessee's favour by way of remand
A.Y. :
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