The Tax Publishers2020 TaxPub(DT) 5462 (Mum-Trib)

INCOME TAX ACT, 1961

Section 92C

Once TPO had accepted cost of inputs determined by assessee by applying TNMM as the MAM in substantial part of international transaction of import of APIs, TPO had no discretion of cherry picking two APIs and apply CUP to benchmark transaction.

Transfer pricing - Determination of ALP - MAM - Adoption of different methods for closely linked transactions

Assessee imported 17 APIs from its (AEs) and adopted Transactional Net Margin Method (TNMM) as most appropriate method (MAM) to benchmark its international transactions of import of APIs. Out of 17 APIs, TPO could obtain comparable price in respect of only four APIs under section 133(6). TPO accepted the price adopted by assessee in respect of two APIs, i.e., Hydroxypropyl Cellulose and Macrogol, as assessee's import price of said APIs was lower than comparable price. In respect of the other two APIs, i.e., Mycophenolate Mofetil and Activated Carbon, TPO applied CUP method to benchmark the transaction as import price of these two items was higher than average price per unit of comparable. TPO made ALP adjustment of in respect of international transaction of import of two APIs from AEs. Held: Assessee imported APIs from its AEs for manufacturing FDFs and had exported FDFs to its AEs under manufacturing arrangement. Thus, entire international transaction of import and export was within closed loop of AEs and hence, interlinked once TPO had accepted cost of inputs determined by assessee by applying TNMM as the MAM in substantial part of international transaction. TPO had no discretion of cherry picking two APIs and apply CUP to benchmark transaction.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2012-13


INCOME TAX ACT, 1961

Section 37(1)

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