INCOME TAX ACT, 1961

section 92C

Transfer pricing - Determination of ALP - MAM - Aggregation v. segregation

Assessee was engaged in manufacture and sale of Mercedes Benz cars, automobile parts, components and consumables. In addition to manufacturing of Mercedes Benz cars, assessee had also imported Completely Built Units (CBUs) from AE. The sale of cars was normally done through dealers. In addition to import of CBUs, assessee also imported spare parts or purchased them locally, which were sold to the dealers for their after sales activity. In addition, assessee also paid royalty to AE and that payment of royalty was also aggregated. Assessee applied aggregation approach and combined all the transactions undertaken by it, including transaction of manufacture of passenger cars, under which it had made imports of raw materials from its AE and combined margins of transaction of import of Completely Built Units (CBUs) and spares. The assessee had applied combined TNMM method approach but TPO segregated the transactions of import of CBUs spares and import of CBUs and compared margins of two transactions and made an upward adjustment in the hands of assessee.Held: There was no merit in approach adopted by TPO, wherein margins of CBUs were compared with margins of spares imported from AE and all the transactions undertaken by assessee had to be benchmarked under umbrella of manufacturing activity on aggregate basis. However, TPO had applied RPM method to compare margins of CBIs with margins of spare parts, matter was restored back to TPO to compare margins shown by assessee on aggregate basis with finally selected mean margins of comparables and in case it was to be found to be within + 5% range, then no addition was warranted.

REFERRED :

FAVOUR : In favour of assessee

A.Y. : 2009-10

INCOME TAX ACT, 1961

Section 37(1)

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