ITAT Directs TPO/AO to Delete Adjustment on Export Commission Payment ALP

Honda Motorcycle & Scooter India Pvt Ltd Vs ACIT (ITAT Delhi)

In the case of Honda Motorcycle & Scooter India Pvt Ltd vs. ACIT, ITAT Delhi directed the Transfer Pricing Officer (TPO) and Assessing Officer (AO) to delete the adjustment made on account of the arm’s length price (ALP) of export commission payment.

The assessee, a subsidiary of Honda Motor Co. Ltd., Japan, had entered into an export agreement with its parent company, whereby it paid export commission at 5% of the freight on board (FOB) value of exports. The TPO rejected the assessee’s transfer pricing methodology and determined the ALP at nil, suggesting an adjustment for the entire export commission paid.

The assessee contended that the payment of export commission was intrinsically linked with its manufacturing and sales activities and could not be benchmarked separately. The Tribunal agreed with the assessee’s argument, citing previous decisions in the assessee’s favor in earlier assessment years.

Therefore, based on the precedent and parity of facts, the Tribunal directed the TPO/AO to delete the adjustment on account of the ALP of the export commission payment.

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