RPM is Most Appropriate Method for Ascertaining ALP as the Distributer did not Make any Value Addition to Goods: Delhi HC [Read Order]
RPM – RPM is Most Appropriate Method – RPM is Most Appropriate Method for Ascertaining ALP – Ascertaining ALP – delhi hc – taxscan
RPM – RPM is Most Appropriate Method – RPM is Most Appropriate Method for Ascertaining ALP – Ascertaining ALP – delhi hc – taxscan
The Delhi High Court Resale Price Method (RPM) is the Most Appropriate Method(MOM) for Ascertaining Arm’s Length Price (ALP) as the distributor did not make any value addition to the goods.
The Assessing Officer (AO) passed orders under Section 144C read with Section 143(3) of the Income Tax Act, 1961 [“Act”]. The record also showed that according to the Transfer Pricing Officer(TPO) as well as the Dispute Resolution Panel (DRP), the Most Appropriate Method (MAM) for ascertaining the ALP was the TNMM.
The respondent/assessee, Fujitsu India Private Limited contended to the contrary. It was argued that since it was a distributor which did not make any value addition to the goods received by it from its principal, the MAM for ascertaining ALP concerning the international transaction in issue was the Resale Price Method (RPM).
The Tribunal has held that although the TPO and the DRP have observed that the respondent/assessee is a full-fledged risk-bearing distributor performing various functions and therefore the MAM is not RPM, no comparable instances have been brought on record by the TPO and the DRP.
It was found that the respondent/assessee resold the goods in the market without any value addition and therefore, the gross margin earned on such transaction was the only determinative factor for analysing the gross compensation after the cost of sale. Bearing these two aspects in mind, the Tribunal concluded that RPM was the MAM available to benchmark the concerned international transactions.
A division bench of Justice Rajiv Shakdher and Justice Girish Kathpalia viewed that the tribunal concluded that the business of the assessee was merely that of a pure trader, and there was no value addition made before re-selling the particular products (i.e. the SIM cards), its consequent finding that RPM is the Most Appropriate Method, is irreproachable.
The Court upheld the order of the Tribunal.
To Read the full text of the Order CLICK HERE
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