Kansai Nerolac Paints Limited Vs DCIT (ITAT Mumbai)
The Income Tax Appellate Tribunal (ITAT), Mumbai, disposed of the assessee’s appeals and the Revenue’s cross appeals for Assessment Years 2012-13 and 2013-14 through a consolidated order. Since common issues arose in all appeals, the Tribunal treated AY 2012-13 as the lead case and applied its findings to the connected appeals. The assessee is engaged in the business of manufacturing paints and varnishes.
For AY 2012-13, the Tribunal considered the transfer pricing adjustment relating to exports of water-based paints to an Associated Enterprise (AE). The assessee had benchmarked the transaction using the Transactional Net Margin Method (TNMM) with contribution margin as the Profit Level Indicator, whereas the Transfer Pricing Officer (TPO) adopted the Comparable Uncontrolled Price (CUP) Method by comparing domestic sales with export sales and made an adjustment of Rs. 8,88,796. The Tribunal observed that an identical issue had already been decided in the assessee’s own case. It held that domestic and export transactions operate under different commercial and economic circumstances and that, in the absence of comparable uncontrolled export transactions, the CUP Method could not be applied. Following the earlier coordinate bench decision, the Tribunal deleted the transfer pricing adjustment.
