This article discusses ITA No.526/DEL/2021 where SMA Nutrition India Pvt Ltd contested the income assessment and transfer pricing adjustments made by the National e-Assessment Centre, Delhi for the fiscal year 2016-17.
The appellant, SMA Nutrition India Pvt Ltd, a subsidiary of Nestle SA, challenged the order passed by the assessing officer under the directions of the Dispute Resolution Panel (DRP) dated March 19, 2020. The company disagreed with the proposed assessment which adjusted its reported losses against an assessed income, and further contested the transfer pricing adjustments related to international transactions.
The primary dispute focused on the assessment of a substantial increase in taxable income from a reported loss, alongside contentious transfer pricing adjustments concerning the arm’s length pricing of international transactions. The appellant argued that the assessing officer and the Transfer Pricing Officer (TPO) erroneously included incomparable companies in their benchmarking analysis and rejected applicable comparables presented by SMA Nutrition.
The tribunal addressed several issues including the appropriateness of the segmental profitability for transfer pricing analysis, the challenge of the comparables used by the TPO, and the rejection of segmental accounts and profitability submitted by the appellant. The case highlighted significant differences in the functional profile of the appellant’s segments, which were not properly considered in the initial assessments.
The tribunal’s decision to remit the issue back to the assessing officer for a thorough review of the segmental accounts suggests a move towards a more nuanced understanding of transfer pricing adjustments. This case underscores the complexities of managing international transactions and the importance of accurate benchmarking in transfer pricing disputes. long_description>
Order pronounced in the open court on August 2, 2022.
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