An examination of ITA No. 1560/DEL/2021 involving Grohe India Pvt. Ltd. against the Deputy Commissioner of Income Tax, Circle 2(1), New Delhi, relating to the assessment year 2017-18. This case addresses a transfer pricing dispute regarding the appropriate benchmarking method for international transactions.
The appeal stems from the rejection of the Resale Price Method (RPM) by the tax authorities in favor of the Transactional Net Margin Method (TNMM) for benchmarking international transactions in sanitary wares. The case involves complex issues related to the functional and risk analysis of international transactions and the appropriate application of transfer pricing methods.
The tribunal scrutinized the methods applied by the tax authorities and the positions held by Grohe India through various assessment years, focusing on the consistency and suitability of the chosen methods in reflecting the arm’s length nature of the transactions.
The tribunal’s decision to favor the RPM as the most appropriate method marks a significant precedent in transfer pricing cases, emphasizing the need for a methodological approach that aligns closely with the company’s business model and transaction profiles. The case highlights the critical aspects of transfer pricing documentation and the need for detailed functional analysis.
Grohe India Private Limited vs DCIT on Transfer Pricing Dispute: ITA 1560/DEL/2021
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