Ace Antenna India Pvt. Ltd. (“the assessee”), a routine distributor of telecommunication products, imported Radio Frequency (RF) parts and base station antennas from its AE and resold them to unrelated customers in India without value addition. For AY 2022-23, the assessee applied RPM to benchmark the import transaction, which was rejected by the TPO/DRP in favour of TNMM on the ground that the assessee performed functions beyond routine distribution
Assessee’s Contentions | Revenue’s Contentions | Court’s Judgment |
|---|---|---|
The assessee contended that RPM should be adopted instead of TNMM for benchmarking the import transaction, as it functioned as a routine distributor and resold the goods without any substantial value addition. | The Revenue agreed that the assessee’s grievance had been settled pursuant to the rectification order, which revised the TP adjustment to NIL after considering the corrected ALP computation. | The Tribunal noted that the rectification order had resolved the assessee’s grievance by reducing the TP adjustment to NIL and, therefore, the original grounds of appeal no longer survived for adjudication. |
It was submitted that the residual professional charges of ₹2.32 lakh represented only 0.0117% of trading turnover, and therefore could not justify rejection of RPM for the entire trading segment. | The Revenue did not dispute the effect of the rectification order and accepted that, after the revised computation, the assessee’s international transactions were at arm’s length with no TP adjustment remaining. | The Tribunal accordingly directed the AO to give effect to the rectification order and consequentially treat the TP adjustment as NIL. Since the assessee’s grievance had been addressed through rectification, the appeal was partly allowed. |
ITAT held that RPM was the MAM for benchmarking the import of goods, as the assessee resold the products without any physical alteration or value addition. Minor professional/technical expenses and other ancillary activities were insufficient to alter the assessee’s characterization as a routine distributor; accordingly, the TPO/AO was directed to adopt RPM for determining the ALP.
