Case Law Details
PCIT Vs Oriflame India Pvt Ltd (Delhi High Court)
Introduction: The case of PCIT vs. Oriflame India Pvt Ltd before the Delhi High Court involved the Income Tax Appellate Tribunal’s (ITAT) reconsideration of Transfer Pricing Officer’s (TPO) proposed income adjustments. The dispute revolved around the exclusion of Modicare Limited as a comparable entity and the method of benchmarking.
Detailed Analysis: Oriflame India Pvt Ltd, a subsidiary of Oriflame International SA, engaged in selling skincare and cosmetic products, faced international transaction scrutiny with associated enterprises for the assessment years 2009-10 to 2012-13. The TPO initially proposed upward adjustments based on Modicare Limited’s inclusion as a comparable entity under the Resale Price Method (RPM).
However, the matter reached the ITAT, which remanded it back to the TPO for reconsideration. Subsequently, the Delhi High Court, upon appeal by Oriflame India Pvt Ltd, directed the ITAT to re-examine the appropriateness of Modicare’s inclusion and consider adopting the Transactional Net Margin Method (TNMM).
In its subsequent order, the ITAT excluded Modicare as a comparable entity, citing significant differences in product segments and marketing strategies. Additionally, it recommended TNMM as the most appropriate method for benchmarking.
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