Product Type Doesn’t Impact RPM Margin; Trading Firms Can’t Be Excluded | ITAT

Case Details: Troy Chemicals India (P.) Ltd. vs. Commissioner of Income-tax (Appeals), NFAC - [2025] 175 taxmann.com 99 (Mumbai-Trib.)

Judiciary and Counsel Details

• Sandeep Singh Karhail, Judicial Member & Bijayananda Pruseth, Accountant Member
• Tejveer Singh for the Appellant.
• Pravin Salunkhe, Sr.DR for the Respondent.

Facts of the Case

The assessee, a subsidiary of a US-based company, was primarily engaged in trading specialty chemicals in India. During the relevant assessment year, the assessee entered into an international transaction with its Associated Enterprise (AE). The assessee aggregated these transactions for the purpose of transfer pricing benchmarking analysis.

The Transfer Pricing Officer (TPO) excluded 13 companies from the list of comparables prepared by the assessee, on the basis that these companies are involved in the business of trading in bulk chemicals while the assessee is a trader of specialty chemicals. The TPO made an adjustment and computed the adjustment amount of Rs. 2,39,98,806. The Dispute Resolution Panel (DRP) affirmed the order of TPO.

Aggrieved by the order, an appeal was made to the Mumbai Tribunal.

ITAT Held

The Tribunal held that, as per the Transfer Pricing Study Report, the assessee was a trader of speciality chemicals and didn’t make any significant value addition to the products sold by it. The transfer pricing benchmarking analysis of the international transactions undertaken by the assessee with its AE by adopting RPM as the most appropriate method has not been disputed by any of the lower authorities. Only the transfer pricing analysis conducted by the assessee qua the selection of comparable was disputed by the TPO.

In the present case, the TPO and DRP rejected comparability only on the basis that these companies were engaged in trading in bulk chemicals while the assessee was a trader of speciality chemicals. The TPO and DRP did not dispute the transfer pricing analysis conducted by the assessee regarding the selection of comparables.

Accordingly, it was held that the TPO and DRP have erred in rejecting the comparability based on the nature of the products traded by them.

List of Cases Reviewed

• Mattel Toys (I) (P) Ltd. v. Dy. CIT [2013] 34 taxmann.com 203/144 ITD 76 (Mumbai)
• Asstt. CIT v. Kobelco Construction Equipment India Ltd. [2017] 81 taxmann.com 31 (Delhi – Trib.)
• Pepperl & Fuchs (India) (P.) Ltd. v. Dy. CIT [2019] 105 taxmann.com 29 (Bangalore – Trib.)[Para 18] Followed

List of Cases Referred to

• Mattel Toys (I) (P) Ltd. v. Dy. CIT [2013] 34 taxmann.com 203/144 ITD 76 (Mumbai) (para 14)
• Asstt. CIT v. Kobelco Construction Equipment India Ltd. [2017] 81 taxmann.com 31 (Delhi – Trib.) (para 15)
• Pepperl & Fuchs (India) (P.) Ltd. v. Dy. CIT [2019] 105 taxmann.com 29 (Bangalore – Trib.) (para 15).