Determining the characterisation of an entity before the selection of most appropriate method is critical

Fulford (India) Ltd v. DCIT (ITAT Mumbai) – The Tribunal made specific reference to the noting of the DRP in its order viz., that the assessee may be justified in claiming that own researched medicine should fetch higher profit margin, may be justifiable arguments, but the same had to be supported by adequate fact and each and every medicine had to be shown with respect to back-up research and development to justify the profit margin. The Tribunal found merit in the argument of the assessee that the TPO should apply his mind afresh every year and should not rely on the orders of the TPO for preceding years. Further, the Tribunal observed that according to the DR, the assessee’s submission that it acted as a secondary manufacturer, which was akin to a “value added distributor”, was not made before the lower authorities. Accordingly, the Tribunal opined that in the interest of justice they deem it proper to restore the issue to the AO for fresh adjudication.