The appeal concerned the determination of the arm’s length price (ALP) in respect of international transactions involving the import of finished goods by the assesse, a full-fledged distributor engaged in the trading of sunglasses and frames without any value addition. The Transfer Pricing Officer (TPO) had rejected the Resale Price Method (RPM) and applied the Transactional Net Margin Method (TNMM), resulting in an adjustment.

Earlier, while adjudicating Assessment Year 2010-11, the Tribunal had remanded the issue relating to AMP expenses; however, the grounds relating to transfer pricing adjustment on import of finished goods remained unadjudicated. Upon appeal, the Delhi High Court observed that the Tribunal had failed to address these specific grounds and accordingly remanded the matter back to the ITAT for fresh consideration.

During rehearing, the assesse relied upon its own case for Assessment Year 2009-10, wherein the Tribunal had categorically held that RPM is the Most Appropriate Method, considering the assesses functional profile as a trader reselling goods purchased from associated enterprises without any value addition. The said finding had also been affirmed by the Jurisdictional High Court, thereby attaining finality.

The Tribunal noted that the facts for the year under consideration were identical and that no distinguishing circumstances had been brought on record by the Revenue. Respectfully following the binding judicial precedent, the ITAT directed the AO/TPO to recompute the arm’s length price by adopting the Resale Price Method and to carry out fresh benchmarking accordingly.

Consequently, the grounds raised by the assesse relating to transfer pricing adjustment on import of finished goods were allowed for statistical purposes, reaffirming the principle that RPM is the appropriate method where goods are resold without further processing or value addition

Source Link- https://itat.gov.in/public/files/upload/1767176124-6sRgq6-1-TO.pdf

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