Manufacturing & distribution activity being different it is fair to segregate both contracts: ITAT Mumbai

Fulford (India) Limited Vs DCIT (ITAT Mumbai)

ITAT Mumbai held that as under distribution segment assessee is purchasing Finished Drug Formulation from its AE for sale in India and under manufacturing segment assessee is transacting with non-AEs, it is fair and reasonable to segregated contract of manufacturing activity and distribution activity. Accordingly, matter remanded.

Facts- The assessee/appellant is engaged in the business of manufacturing and distribution of Pharmaceutical Products in India. The assessee is a subsidiary of Schering-Plough Corporation, USA. During the period relevant to the Assessment Year under appeal, the assessee entered into various international transactions with its Associated Enterprise(AE). During the course of assessment proceedings the Transfer Pricing Officer (TPO) made adjustment in respect of import of Active Pharmaceutical Ingredients and import of finished drug formulations.

Dispute Resolution Panel rejected the objections filed by the appellant. Being aggrieved, the present appeal is filed.

Conclusion- The provisions of section 92C of the Act requires to compute ALP by following the most appropriate method. Once the Tribunal holds that CUP is the most appropriate method to benchmark a particular transaction without there being any change in the facts and nature of transaction, now it cannot be argued that CUP is not the most appropriate method. The assessee has not brought before us any material to show difference in the nature of transaction or variation in the terms and conditions for import of APIs from the AEs in the impugned assessment year.

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