A. Hartrodt India Pvt. Ltd. .(“Assessee”) engaged in international freight forwarding and logistics services, benchmarked its freight forwarding transactions under TNMM. The dispute before the Tribunal pertained to the inclusion of two comparables and denial of working capital adjustment.The assessee furnished additional evidence before the Tribunal to demonstrate the functional dissimilarity of the comparables. As the evidence required verification, the Tribunal restored the issues to the DRP for fresh adjudication.
Assessee’s Contentions | Revenue’s Contentions | Tribunal’s Judgment |
Cargo Service Center India Pvt. Ltd. was engaged in cargo terminal and cargo handling activities and was therefore functionally different from a freight forwarder. | The company was engaged in the logistics sector, passed all the TPO's filters and was broadly comparable under TNMM. The additional evidence relied upon by the assessee was not contemporaneous. | Comparable selection must be based on a detailed FAR analysis. Broad functional similarity alone is insufficient to establish comparability under TNMM. |
Unique Speditore Pvt. Ltd. rendered turnkey project handling, warehousing and other value-added logistics services, rendering it functionally incomparable. | Minor functional differences are permissible under TNMM and the company was broadly comparable to the assessee's logistics operations | While exact FAR matching under TNMM may not always be achievable, comparability must still be established through an appropriate FAR analysis. The issue was remanded to the DRP for fresh adjudication. |
The assessee also sought working capital adjustment, contending that differences in working capital materially affected margins. | The issue was not raised before the DRP and the assessee failed to demonstrate the impact before the TPO. | The Tribunal admitted the additional ground and restored the issue of working capital adjustment to the DRP for adjudication on merits. |
Ruling Summary -
The Tribunal held that under TNMM, exact FAR matching may not always be achievable; however, functional comparability cannot be established merely through broad assertions. As the additional evidence submitted by the assessee required verification, the issues relating to comparable selection and working capital adjustment were restored to the DRP for fresh adjudication.
