PCIT-1 Vs D Light Energy P. Ltd. (Delhi High Court)
Delhi High Court held that Resale Price Method (RPM) is the most appropriate method to determine arm’s length price since assessee purely acts as a distributor and makes no value addition. Thus, appeal of revenue dismissed.
Facts- Since assessee had entered into various international transactions with Associated Enterprises, the case was referred to TPO. The TPO, after observing that the purchase of lights/other accessories and the warranty cost claim are closely linked transactions, was of the opinion that they needed to be aggregated for the purpose of benchmarking the same, in view of the judgement of this Court in Pr. Commissioner of Income Tax-1 vs. Avery Dennison (India) Pvt. Ltd., ITA 386/2016 & connected matters decided on 28.07.2016, wherein the determination by aggregating/clubbing transactions under Transactional Net Margin Method (TNMM) was upheld after observing that the assessee therein was predominantly a manufacturer and the services received by it from its AE were intrinsically linked to the core business operation. Resultantly, vide order passed u/s. 92CA(3) of the Act, the appellant proposed an adjustment of Rs.10,61,91,407/- to the price shown by the assessee in the books of accounts.
DRP vide its order dated 29.12.2021, agreed with the view held by TPO on selecting the TNMM over the Resale Price Method (RPM) as the most appropriate method. ITAT partly allowed the appeal and held that the most appropriate method adopted by the assessee of RPM to benchmark the transaction of solar goods was correct. Being aggrieved, revenue has preferred the present appeal.
