RMP most adequate method where Taxpayer is involved in Resale and Purchase of Finished Goods: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Delhi bench consisting of N.K. Billaiya, Accountant Member, and Yogesh Kumar U.S, Judicial Member held that RMP most adequate method where the taxpayer is involved in the resale and purchase of finished goods.

The assessee M/s Karcher Cleaning Systems Vs. Addl. C.I.T Pvt Ltd., is a subsidiary of Karcher Beteilgungs which started its commercial activities and is primarily engaged in the business of importing and resale of industrial cleaning systems in India. Transaction pertaining to the purchase of goods for the purpose of resale in India has also been analyzed using Internal Comparable Uncontrolled Price Method. During the course of transfer pricing assessment proceedings, the TPO objected to the arm’s length margin computed in relation to the trading segment, by rejecting RPM adopted by the assessee for the trading segment and applied Transactional Net Margin Method (TNMM) to benchmark the trading segment.

The Counsel for the appellant, Rohit Tiwari, and Tanya, submitted that the assessee is primarily engaged in the trading of goods and it does not add value to the goods purchased from related parties which are further resold to unrelated parties and that the assessee further pointed out that it has already been substantially demonstrated before the Customs Office that the goods imported by the assessee are not for the purpose of local assembly into finished goods which have been accepted by the Customs Department.

The Tribunal said” the assessee is a pure trading company involved in the distribution activity without adding any value to the purchased product and hence the RPM is the most appropriate method. We, accordingly, direct the Assessing Officer/TPO to accept RPM as the most appropriate method and decide the issue accordingly. RPM is the most appropriate method, on the facts of the case in hand, all the other issues raised by the assessee will be decided accordingly.”

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