Upward Adjustments Of Income As Proposed By TPO Stands Withdrawn: Delhi High Court Applies Rule Of Consistency To Adopt TNMM

The Division Bench comprising Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav observed that “it was brought to our attention that the matter has been resolved inter partes in terms of the assessment which came to be finalised for AY 2014-15 and that Modicare Limited has been excluded from the list of comparables to determine the ALP and the upward adjustments of income as proposed by the Department has not been undertaken as well”. (Para 7)

The Bench noted that pursuant to High Court's remand, the ITAT had excluded Modicare Ltd under Resale Price Method (RPM) as a comparable on grounds of non-availability of segmental data, difference between the entities in the treatment of discounts given to consultants/agents and substantial difference between the entities in AMP expenses incurred by them.

The Bench also found that the ITAT had adopted TNMM over RPM as MAM by stating that under TNMM, standard of comparability is relaxed relative to other methods with only broadly similarity of functions required.

The Bench noted that the matter has been resolved inter partes in terms of the assessment which came to be finalized for AY 2014-15 and Modicare Limited has been excluded and the upward adjustments of income as proposed by Revenue has not been undertaken as well.

The High Court therefore applies principle of consistency and dismisses Revenue's appeal.

Counsel for Appellant/ Assessee: Sanjeev Menon

Counsel for Respondent/ Assessee: Himanshu S. Sinha and Bhuwan Dhoopar

Case Title: Pr. CIT vs Oriflame India Pvt Ltd

Case Number: ITA No 227/2023

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