Sabic India Pvt Ltd was primarily engaged in providing marketing support services to facilitate the selling of fertilizers and chemicals in India on behalf of the Sabic Group holding company. The Indian company did not hold any title to inventories and all products sold were directly invoiced to the holding companies of the taxpayer. To determine the arm’s length remuneration for marketing support services Sabic India Pvt Ltd found that the TNMM was the most appropriate method
The tax authorities disagreed and instead held that the CUP method was more appropriate. On that basis an assessment was issued.
Judgement of the Tax Appellate Tribunal
The Tribunal decided in favor of Sabic India Pvt Ltd and set aside the tax assessment.
The Tribunal held that the TNMM cannot be discarded without any valid justification as the method was widely accepted by the Indian revenue since 2009.
The Tribunal concluded that the tax authorities were not able to provide any justification for its decision that the methodology was not suitable.
Excerpt
“Considering the facts of the case in hand in totality in the light of the judicial decisions mentioned here in above we are of the considered view that the lower authorities should have accepted TNMM as the most appropriate method on the business profile qua the international transaction of the assessee as was accepted in A.Y.2009-10 to 2014-15. We accordingly direct the AO/ TPO to delete the TP adjustment of Rs.361320620/- appeal filed by the assessee is accordingly allowed.”
Click here for other translation