INCOME TAX ACT, 1961

Section 92C

Transfer pricing - Determination of ALP - MAM - Change in method consistently adopted without there being change in fact or law

Assessee exported finished goods to its AE abroad and adopted Transactional Net Margin Method ('TNMM') which was determined by the assessee as the most appropriate method.(MAM) to benchmark said transaction. However, TPO adopted CUP method as the MAM and accordingly suggested TP adjustment.Held: TNMM method as adopted by assessee in earlier years had constantly been accepted to be the MAM. Though, res judicata does not apply to taxation proceedings, however, consistency should be maintained in assessment proceedings. A consistently applied method be changed only if there is a change in facts and law. In assessee's case, there was no such case had been made out. Rather, TPO had proceeded to examine issue on the basis of TNMM method. He has ordered for updated data of comparable. Thereafter, when even on the basis of updated data, international transaction was found to be at arm's length, he laconically held that CUP method would be preferred. DRP summarily upheld the change from TNMM to CUP method without assigning any cogent reason, whatsoever, which was not justified. Applying TNMM, assessee's margins in AE segment were much higher than margin in non-AE segment and therefore, it could be stated that transactions were at arm's length.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2014-15

INCOME TAX ACT, 1961

Section 92C

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