Andante Foods LLP Vs DCIT (ITAT Bangalore)
Bangalore Tribunal considered important issues on selection of tested party & benchmarking of international transactions under transfer pricing provisions.
Assessee, Andante Foods LLP, is engaged in food processing & nutraceutical products, & operates through a Belgium-based subsidiary that acted as its sales agent. International transactions included sale of processed foods of ₹11.78 crore, commission payments of ₹4.88 crore, purchase of packing materials, rent for machinery, & compensation for damaged goods. In its TP study, Assessee selected the Belgium AE as the tested party, applied TNMM, & arrived at a median margin of 2.27% with 13 comparables.
TPO rejected this approach, holding that Assessee was the less complex entity & that audited financials of the AE were not produced. Fresh benchmarking was carried out with the Indian entity as the tested party, leading to a TP adjustment of ₹17.23 crore. Additionally, ₹4.53 lakh was added as notional interest on delayed receivables, treating it as a separate international transaction. DRP upheld the TPO’s approach.
Before Tribunal, Assessee argued that the Belgium AE was merely a commission agent with minimal risk profile, & thus more appropriate as tested party. It also contended that interest on receivables was already factored into working capital adjustments under TNMM & should not be benchmarked separately.
