INCOME TAX ACT, 1961

Section 92C

Transfer pricing - Determination of ALP - MAM - Rejection of consistently adopted method without there being change in facts --- Rule of consistency

Assessee entered into international transactions with AEs, viz., Import of raw material & finished goods, payment towards fee, exports of chemical additives and commission on customer service support activities. In assessee's TP study report, all these transactions were aggregated and benchmarked using entity level TNMM method. One of the transactions viz. export of chemical additives aggregated to Rs. 11,206 lakhs. Assessee had exported 9 products to its various AEs. Similar products were sold to non-AE's in domestic as well as in export markets. Accordingly, TPO, observing average rate of these products as sold to AE and non-AEs, concluded that there was difference in rates charged to AEs and non-AEs and, therefore, CUP method was adopted to benchmark these transactions. Held: Facts were pari materia the same in earlier assessment years as well as in assessment year 2009-10. In this year also, assessee's consistent TNMM methodology had been rejected by TPO without any sound basis. Although principle of res judicate are not applicable to Income Tax proceedings, however, rule of consistency would debar the revenue to change its stand in difference assessment years without any sound basis, facts and circumstances being identical. Accordingly, consistently applied TNMM method could not be disregarded without there being any change in facts and, therefore, adoption of CUP method was not justified.

Supported by:Pr. CIT v. Quest Investment Advisors Pvt. Ltd. (2018) 409 ITR 545 (Bom-HC) : 2018 TaxPub(DT) 4218 (Bom-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2009-10 to 2012-13

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