Change of Opinion between CIT and TPO cannot be a Ground for Interference: Delhi HC grants relief to MakeMyTrip [Read Order]

MakeMyTrip - Supreme Court of India - Taxscan

The Delhi High Court recently observed that difference of opinion between Commissioner of Income Tax (CIT) (A) and Transfer Pricing Officer (TPO) cannot be a ground for interference.

The division bench comprising of Justice S.Ravindra Bhat and Justice Sanjeev Sachdeva held so while granting relief to Makemytrip.

Makemytrip is an Indian online travel company, which provides online travel services including flight tickets, domestic and international holiday packages, hotel reservations, rail and bus tickets, etc.

During the AY 2005-2006, Assessee filed a transfer pricing report which was examined by TPO, who felt that the adoption of the Resale Price Method (RPM) was appropriate in the circumstances. The CIT (A) set aside the findings and adjustments made in the TPR.The CIT (A) was influenced by the fact that the services provided in the two business segments, by the assessee, rendered them matchless at the gross margin level.

The CIT also held that on account of high degree of functional congruence required for application of RPM, it could not be considered appropriate. The ITAT, in the revenue’s appeal, considered the matter afresh and, after a detailed analysis, affirmed the CIT (A) findings.

The ITAT held that the selection of most appropriate method by the TPO of resale price method is incorrect as resale price method is inapplicable to the facts of the assessee.

On perusal of the computation it was found that the adjustment computed by the TPO has the effect of downward adjustment to the book value of international transactions of the assessee. On this basis ITAT rejected the approach adopted by the TPO.

In summary, appeal of the revenue in relation to the benchmarking adopted by the assessee and the approach followed by the CIT (A) for the international transactions of the assessee is at arm’s length and the grounds raised by the Revenue are dismissed, accordingly.

While dismissing the appeal, the division bench observed that no substantial question of law arises in the appeal and dismissed the appeal filed by commissioner of income tax and accordingly held that the difference of opinion between the CIT(A) and the TPO, as to the appropriateness of one or the other methods, cannot be a ground for interference.

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