PCIT Vs Sabic India Pvt Ltd. (Delhi High Court)
Delhi High Court held that rejection of Transactional Net Margin Method (TNMM) as the most appropriate method without reasons and applicability of any other methods without reasons thereof unjustified.
Facts- The assessee (M/s Subic India Pvt. Ltd.) had preferred the appeal before Tribunal assailing the assessment order dated 31.03.2021 framed under Section 143(3) of the Act read with Section 144C(13) of the Act, for the assessment year 2016-17. The assessee was aggrieved by the enhancement of its total income by a sum of ₹3,61,32,20,620/- on account of transfer pricing adjustment in terms of the order passed by the Transfer Pricing Officer (TPO). The assessee’s appeal was allowed by the Tribunal.
Being aggrieved, revenue has preferred the present appeal.
Conclusion- Held that the TPO had provided no reasons whatsoever for rejecting the TNMM as the most appropriate method. Thus, the Tribunal has rightly concluded that the TPO’s decision to reject TNMM as the most appropriate method was without reasons.
Undeniably, Rule 10AB of the Rules does permit determination of the ALP by simulating the price that would have been charged in similar uncontrolled transactions under similar circumstances having regard to all relevant facts. However, the recourse to this method would be available only if none of the other methods are considered as the most appropriate method. However, as noted above, the TPO had provided no reasons for rejecting TNMM, which had been used in earlier years. The TPO had also not discussed the applicability of any other methods.
