Stryker India Private Limited Vs ACIT (ITAT Delhi)
Wrong Comparables Out, Right Comparables In – Netting of Payables Allowed, Stryker’s TP Case Remanded-ITAT Delhi
Tribunal ruled that comparables must reflect true functional similarity. Interest adjustment on delayed receivables remanded, with direction to allow netting off against payables with AEs.
Stryker India Pvt. Ltd., a wholly owned subsidiary of Stryker Far East Inc., Hong Kong, engaged in distribution of medical/surgical products & provision of marketing support services, challenged Transfer Pricing (TP) adjustments made by the TPO & upheld by the AO/DRP for AY 2018-19. The dispute related to (i) benchmarking of its marketing support services segment & (ii) adjustment on account of interest on delayed receivables.
Assessee applied TNMM with OP/TC as PLI, which was accepted in principle. However, TPO rejected seven of the assessee’s comparables, introduced new comparables & made an adjustment of ₹1.74 crore. Additionally, interest adjustment of ₹68.62 lakh was made on receivables by treating them as a separate international transaction & applying LIBOR + 400 bps. DRP excluded one comparable but otherwise sustained the adjustments.
On appeal, Tribunal held that Deepali Design & Exhibits Pvt. Ltd., engaged in organizing exhibitions, was wrongly excluded since its functions were comparable to Assessee’s marketing support services. Conversely, Just Dial Ltd., engaged in BPO-type services, was functionally different & had to be excluded. The matter was remanded to TPO to recompute ALP after revising the set of comparables accordingly.
