Case Law Details
DCIT Vs Ampacet Speciality Products Private Limited (ITAT Pune)
ITAT Pune held that in view of huge quantitative differences, Comparable Uncontrolled Price (CUP) method cannot be applied. Hence, Transactional Net Margin Method (TNMM) is applicable in respect of international transaction of ‘Sale of Finished Goods’.
Facts- The assessee is a domestic company engaged in the manufacturing of colour concentrates and additive masterbatches. In addition, it is also engaged in trading activities. AO made a reference to the Transfer Pricing Officer (TPO) for determining the Arm’s Length Price (ALP) of the international transactions.
The revenue’s appeal is against the application of the Comparable Uncontrolled Price (CUP) method in the manufacturing segment. The TPO observed that the assessee applied the TNM method in respect of an international transaction of `Sale of finished goods’ at a transacted value of Rs. 42,11,78,831. He opined that the CUP method should have been applied instead of the TNMM. Accordingly, he computed the transfer pricing adjustment amounting to Rs. 40,77,800/- on this count. CIT (A) allowed the relief.
Conclusion- Held that in view of huge quantitative differences, one cannot say that the price charged for a product sold in huge quantities can be taken as a comparable price for the sale of lower units of the same product. Thus, the CUP is not the most appropriate method in the facts of the case. If the CUP method is excluded, what remains is the TNMM, as was applied by the assessee. We, therefore, hold that the ld. CIT(A) was justified in accepting the assessee’s contention that the TNMM should be applied in respect of international transaction of `Sale of finished goods’.
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