In DCIT, New Delhi v. Exxon Mobil Lubricants Pvt. Ltd., the Delhi Bench of the Income Tax Appellate Tribunal examined the validity of transfer pricing adjustments made under Section 92CA of the Income-tax Act, 1961 for Assessment Year 2005–06. The Assessing Officer, based on the Transfer Pricing Officer’s order, had made substantial additions by rejecting the Comparable Uncontrolled Price (CUP) method and Resale Price Method (RPM) adopted by the assessee and instead applying entity-wide TNMM.

The Tribunal noted that in the assessee’s own case for earlier and subsequent assessment years, the Revenue had consistently accepted CUP as the most appropriate method for the manufacturing segment and RPM for the trading segment. Even in the immediately preceding year, after remand by the Tribunal, the TPO had accepted the arm’s length price computed by the assessee without any adverse inference.

Relying on the Supreme Court judgment in Radhasoami Satsang v. CIT, the Tribunal reiterated that where facts and circumstances remain unchanged, the principle of consistency must be followed and a divergent view should not be taken. The Tribunal further held that Rule 10C mandates a transaction-by-transaction analysis and does not permit arbitrary aggregation of unrelated international transactions under entity-wide TNMM.

Accordingly, the ITAT upheld the order of the CIT(A) deleting transfer pricing adjustments relating to import of base oils, additives, finished goods, trading transactions, and intra-group services. The Tribunal also confirmed deletion of disallowance under Section 40(a)(i), holding that payments for services rendered outside India did not attract withholding tax obligations.

The Revenue’s appeal was thus partly allowed only to the limited extent of foreign travel expense disallowance, while the major transfer pricing additions were rejected.

Source Link- https://itat.gov.in/public/files/upload/1767788424-H4EqmF-1-TO.pdf

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