Delhi High Court Upholds Transfer Pricing Method Selection in Hellmann Worldwide Logistics Case
Title: The Pr. Commissioner od Income Tax-4 vs. Ms. Hellmann Worldwide Logistic India Pvt. Ltd. ITA 1424/2018
Date of Decision: 04.10.2023
CORAM: Hon’ble Mr. Justice Rajiv Shakdher and Hon’ble Mr. Justice Girish Kathpalia
Introduction
The case of ITA 1424/2018 involves an appeal brought under Section 260A of the Income Tax Act, concerning the assessment proceedings for Assessment Year 2008-09. The revenue challenged the order of the Income Tax Appellate Tribunal (ITAT) dated 29.08.2017. The dispute primarily revolved around the selection of the most appropriate method (MAM) for transfer pricing.
Facts of the Case
The respondent, M/S Hellmann Worldwide Logistics India Pvt. Ltd., is a private limited company engaged in various freight and logistics services.
The Assessing Officer initiated scrutiny assessment due to the company’s international transactions, which included charges for import and export freight services with its associated enterprises (AE).
The Transfer Pricing Officer (TPO) initially rejected the Comparable Uncontrolled Price (CUP) method used by the company as the most appropriate method.
The Dispute Resolution Panel (DRP) reduced the transfer pricing adjustment, but the revenue challenged the methodology used.
Court’s Analysis and Decision
The core issue revolved around the choice of the most appropriate transfer pricing method under Section 92C of the Income Tax Act.
The Revenue argued that the company and the Assessing Officer had not initially considered internal Transactional Net Margin Method (TNMM) as MAM and, therefore, the Tribunal had no authority to direct its application.
The Delhi High Court cited relevant precedents, including “Matrix Cellular” and “Dentsply India,” which affirmed that the choice of MAM could be different from that initially adopted if it was found to be more appropriate.
The Court upheld the Tribunal’s detailed reasoning in the impugned order, which established the need for an accurate arms length price for taxation. The Tribunal had directed the company to carry out internal Functional Assets & Risk (FAR) analysis, internal comparability, and, if necessary, provide external comparables under TNMM as MAM.
During the appeal’s pendency, the TPO eventually adopted external TNMM as MAM.
In conclusion, the Delhi High Court found no substantial question of law to answer and upheld the Tribunal’s reasoning, emphasizing that the ultimate aim of transfer pricing is to determine an accurate arm’s length price.
“PRIME LEGAL is a full-service law firm that has won a National Award and has more than 20 years of experience in an array of sectors and practice areas. Prime legal fall into a category of best law firm, best lawyer, best family lawyer, best divorce lawyer, best divorce law firm, best criminal lawyer, best criminal law firm, best consumer lawyer, best civil lawyer.”
Written by- Tarishi Verma