TPcases

An assessment had been issued by the tax authorites in regards of Auronext Pharma’s pricing of purchase and sales transactions with related parties.

The tax authorities had rejected the CUP method applied by Auronext Pharma.

“Since the comparable transactions were with related parties those transactions cannot be considered under CUP method for the purpose of benchmarking the taxpayers transactions.”

Instead, the tax authorities used the Transactional Net Margin Method (TNMM).

An appeal was filed by Auronext Pharma with the ITAT.

Judgement of the Income Tax Appellate Tribunal

The ITAT remanded the case to the tax authorities to examine afresh the data available with respect to un-related parties and find out whether the transaction of the assessee are at arm’s length or not by applying the CUP method.

Excerpt

”
(…)
The sole basis of rejecting the method adopted by the assessee was the transactions were between the related parties and were not un-controlled transactions. A similar view was also expressed by the DRP while passing the impugned order in paragraph 2.2.1. and also in the report filed by the TPO before us dt. 01.05.2023 (supra).

14 Undoubtedly, the assessee in the rejoinder has rebutted the contention of the TPO/DRP and had submitted that the documents/data were furnished before the DRP, of unrelated parties transactions with respect to sale of goods/products. The record shows that the assessee had filed the documents before the DRP and on account of that reason only it was contended by the assessee that the data is readily available. In view of the above, we are of the opinion that the DRP/TPO is duty bound to examine the data available in respect of un-related parties and apply the CUP method to benchmark the international transactions. The assessee, in the original submissions as well as in rejoinder has given the details of unrelated parties, which are mentioned in the preceding paragraphs. In the light of the above, we deem it appropriate to remand back the matter to the file of the TPO/AO to examine afresh the data available with respect to un-related parties and find out whether the transaction of the assessee are at arm’s length or not by applying the CUP method. Needless to say,while doing so, the TPO, may not restrict to the comparables suggested by the assessee, who are unrelated parties and the TPO may be at liberty to find out any other suitable comparables having similar profile, functions and fulfil the other criteria laid down under rule 10B for CUP method.”

“It may be apposite to mention that we have not expressed any opinion on merits of the case of the assessee, more particularly about the TNMM method and capacity utilization etc. Those issues are left open to be decided in appropriate proceedings.”