Firmenich Aromatics Production (India) Private Limited Vs Assessing Officer (ITAT Mumbai)
Mumbai ITAT: Upholds TNMM, Deletes Transfer Pricing Adjustments for Firmenich Aromatics; Allows 80G Deduction on CSR Donations
Facts- Firmenich Aromatics (India) Pvt. Ltd. is engaged in manufacturing and marketing industrial flavours, fragrances, and chemical specialties. The company entered into various international transactions with its Associated Enterprises (AEs), including export of finished goods and payment of royalty for technical know-how, during Assessment Years (AY) 2020-21 and 2021-22.
The Transfer Pricing Officer (TPO) applied the Comparable Uncontrolled Price (CUP) method to benchmark export of finished products and payment of royalty, leading to significant transfer pricing (TP) adjustments of INR215.39 crore (AY 2020-21) and INR159.09 crore (AY 2021-22) for exports, and INR15.94 crore (AY 2020-21) and INR13.47 crore (AY 2021-22) for royalty payments.
The company contended for the Transactional Net Margin Method (TNMM) as the Most Appropriate Method (MAM), highlighting geographic, volume, and functional differences between sales to AEs and non-AEs and reliance on earlier ITAT rulings in its favor for similar facts.
Issues- Whether the CUP method or TNMM is the correct MAM for benchmarking international transactions for export of finished products and royalty payments to AEs.
Whether TP adjustments made by the TPO should be sustained.
