Case Law Details
ACIT (LTU-1) Vs Glenmark Pharmaceuticals Ltd (ITAT Mumbai)
ITAT Mumbai held that assessee selecting Associated Enterprise (AE) as “tested party” justifiable. Accordingly, transfer pricing study conducted by the assessee is duly acceptable.
Facts- The assessee had entered international transactions in the nature of export of goods (formulations) to its Associated Enterprises located in 12 Countries. Besides it had exported R & D services to Switzerland, imported formulations from Argentina. In the Transfer pricing study, the assessee had selected AEs as ‘Tested party” and TNM method as most appropriate method. After examining the transfer pricing study of the assessee, the TPO took the view that the transfer pricing study of the assessee is not proper and accordingly, he did not accept the same.
Accordingly, the AO held that the AEs cannot be treated as tested parties. TPO held that ALP of margin should be taken as the rate of 10.86% earned on sale to non-AEs both in domestic and Export market. Accordingly, he made transfer pricing adjustment of Rs.1,37,66,503/- and Rs.63,09,494/- respectively for the exports made to South Africa and Mexico.
Conclusion- Held that the profitability of the assessee in exporting products to these two AEs is increasing year after year. Under these set of facts and in the facts and circumstances of the case, we are of the view that there is no reason to ignore transfer pricing study conducted by the assessee should be accepted. Accordingly, we set aside the order passed by Ld CIT(A) and direct the AO to delete the transfer pricing adjustment made in respect of exports made to M/s Glenmark, South Africa and M/s Glenmark, Mexico.
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