Database Capturing Market Volatility Shall Be Considered For Making ALP Adjustment Qua Bullion Purchase: Mumbai ITAT

With respect to purchase of precious metals like gold & silver imported from London branch, the Bench comprising Vikas Awasthy (Judicial Member) and Amarjit Singh (Accountant Member) found that even though assessee justified transaction price by making reference to KITCO and Reuters database, the TPO however took the view that London Bullion Market Association (LBMA) was the primary source for estimating price of trading in bullion.

The Bench considered assessee's submission that LBMA publishes the price at a fixed time period, at the opening stage and at the closing stage, which will not capture market volatility, whereas KITCO and Reuters rates cover the high and low rates on daily basis which captures the market volatility.

As per the brief facts of the case, with respect to provision of ITeS, the assessee had suo-moto recomputed ALP margin at 15%. The TPO however made further adjustment since single year margin based on 10 comparable selected by assessee for FY 2012-13 was 18.37%. On appeal, the CIT(A) rejected assessee's contention that due to suo-moto adjustment, the transaction falls within the range of ± 3% margin.

The Bench observed that similar issue has been adjudicated against assessee by Hyderabad ITAT in Tecumesh Products India (P) Ltd, wherein it was held that having treated enhanced amount as ALP by exercising option u/s 92C proviso, it could not contend that threshold of (-)/(+) 5% was available again, if TPO's action resulted in further addition.

The Bench further observed that the CIT(A) has rightly held that LBMA database does not capture volatility in the market because these rates are published at two time of the date therefore high and low rate published by KITCO & Reuters may be the most appropriate for comparison.

With respect to administrative support services in relation to interbank indemnities, the Bench followed the assessee's own case for AY 2008-09 wherein the issue was decided in assessee's favour and TNMM was upheld as Most appropriate Method (MAM) & CUP Method was rejected due to non-availability of data.

Thus, the ITAT upheld the deletion of ALP adjustment.

Counsel for Taxpayer: Nishant Thakkar & Jasmin Amalsadwala

Counsel for Department: Anil Sant

Case Title: Bank of Nova Scotia verses DCIT

Case Number: ITA No 1926/Mum/2022

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