Case Law Details
Sami – Sabinsa Group Ltd. Vs DCIT (ITAT Bangalore)
Facts- The assessee is an Indian multinational company engaged in the export of standardized herbal extracts, fine chemicals, specialty chemicals, cosmeceuticals, phytonutrients and probiotics. The assessee has modern state-of -the art manufacturing facilities in and around Bengaluru and Hyderabad. In this appeal, the first issue that has to be adjudicated is with regard to the determination of Arm’s Length Price in respect of international transaction of sale of herbal products by the assessee to its Associated Enterprise (AE), as required under section 92 of the Act.
The assessee filed TP analysis justifying the price it received for sale of its products to its AE as at arm’s length. The assessee chose Cost Plus Method (CPM) as the most appropriate method (MAM) for determining the ALP. The assessee had chosen 3 comparable companies The gross margins after adjustment towards depreciation was compared with the gross margins after depreication of the comparable companies and it was claimed by the assessee that the international transaction has been carried out at ALP.
The AO made a reference to the Transfer Pricing Officer (TPO) under section 92CA of the Act for determination of ALP. The TPO rejected the RPM as the most appropriate method and chose Transaction Net Margin Method (TNMM) as the most appropriate method.
The assessee filed objections before the DRP in respect of the determination of ALP by the TPO which was incorporated in the Draft Order of Assessment by the AO. The DRP gave certain directions which resulted in the addition made to the total income on account of determination of ALP at much lesser sum than what was determined by the TPO. Still aggrieved, the assessee is in appeal before the Tribunal.
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