TPO can’t treat assessee as manufacturer for TP study if it was treated as trader in succeeding years: ITAT

Case Details: DCIT v. Toto India Industries (P.) Ltd. - [2022] 138 taxmann.com 369 (Mumbai-Trib.)

Judiciary and Counsel Details

• • Prashant Maharishi, Accountant Member & Sandeep Singh Karhail, Judicial Member
  • Ms. Vatsalaa Jha, (CIT) for the Appellant.
  • Dhanesh Bafna for the Respondent.

Facts of the Case

The assessee company was engaged in the business of manufacturing, repairing, modifying, installing, and trading sanitary wares. The assessee contended that it was trader with normal risk with respect to its international transaction pertaining to ‘purchase of finished goods’ and benchmarked its international transaction by applying the Resale Price Method.

However, the Transfer Pricing Officer (TPO) observed that the assessee was the manufacturer and not a mere reseller and rejected the application of RPM and applied TNMM for benchmarking international transactions. On appeal, the CIT(A) reversed the order of TPO. Aggrieved revenue filed an appeal before the Tribunal.

ITAT Held

The Tribunal held that from the financial statements, it was evident that the assessee only earned income from the sale of traded goods and commission income during the relevant financial year. Further, the manufacturing license was taken note of by the Commissioner (Appeals), which also justifies the claim of the assessee as the trader during the relevant assessment year.

Further, it was also not being denied by the revenue that the TPO had accepted the assessee as a trader in succeeding assessment years. Thus, the assessee had rightly been characterized as a trader by the Commissioner (Appeals).