The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) has recently while granting relief to Lenovo India held that Comparable Uncontrolled Price (CUP) is the most appropriate method for determining international transactions for the computation of Price Length Index(PLI).
Assessee Lenovo (India) Pvt. Ltd., company is engaged in the business of
trading, manufacture and sale of desktops, laptops, servers and smartphones.
Assessee filed revised return of income electronically for the assessment year 2016-17. The case was selected for scrutiny. Accordingly, it was noted that the company had international transactions exceeding Rs.10 crores and the case was referred to the Transfer pricing officer for determination of Arm’s Length Price (ALP) after obtaining prior approval from the competent authority.
From the documents submitted, TPO noticed that assessee had adopted CUP method as the most appropriate method for import of parts of manufacture of personal computers for determination of PLI.
TPO computed the adjustment of ALP after applying Transactional Net Margin Method (TNMM) as the most appropriate method and determined the adjustment for Manufacturing segment.Against the adjustment assesee filed appeal before the tribunal.
Padam Chand Kincha, counsel for the assesee submitted that CUP method is the most appropriate method and the assessee has himself determined ALP and suo moto made adjustment. Moreover, CUP is the most appropriate method to benchmark its international transaction of Import of parts and components for manufacture of PCs pertaining to its manufacturing segment.
Sankar K Ganeshan, Counsel for the revenue supported the contentions of the lower authorities.
The tribunal, while considering the case, observed that CUP is the most appropriate method for determining the ALP of the assessee for the importing of goods for manufacturing
Segment
The bench considered the assess’s own case, in the assessment year 2015-16 where it had been observed that the CUP is the most appropriate method for computing the ALP.
Therefore, Beena Pillai, (Judicial Member) and Laxmi Prasad Sahu, (Accountant Member), of the two member bench of the tribunal held that CUP is most appropriate method for the determination of international transactions for the computation of PLI in above terms. Hence, the bench allowed the appeal filed by the assesee.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
