IN HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.1046 OF 2012 Commissioner of Income Tax 6 ..Appellant Versus L'Oreal India P. Ltd. ..Respondent C ........... Mr. Arvind Pinto for Appellant. Mr. P J. Pardiwalla, Senior Counsel, with Mr. A. K. Jasani for . h Respondent. CORAM: S.C. DHARMADHIKARI AND A. A. SAYED, JJ. DATE : 7th NOVEMBER, 2014 P.C.: y ba This Appeal by Revenue challenges order passed by Income Tax Appellate Tribunal, Mumbai Bench, in Income Tax Appeal om No.5423/Mum/2009. assessment year is 2003 04. Tribunal's order dated 25th April, 2012 confirms order of Commissioner of Income Tax (Appeals) XIX, Mumbai, dated 24th July, 2009. B 2] Mr. Pinto, learned counsel, submits that this Appeal raises following two questions of law which are substantial. They are formulated at page 4 of paper book. They read as under: 1/5 (i)Whether on facts and in circumstances of case and in law, ITAT is erred in holding that Resale rt Price Method (RPM) was most appropriate method for ou determining arms length price of Assessee's international transaction in respect of imports of finished goods? C (ii) Whether on facts and in circumstances of case and in law, ITAT is erred in not appreciating that h substantial value addition made to goods sold by Assessee company has changed degree of similarity in ig functions performed; as value of goods originally transferred to Assessee and contribution to value H of final product cannot be evaluated, thereby making RMP non applicable in instant case? y 3] Mr. Pinto, submits that Tribunal and Commissioner of ba Income Tax had seriously erred in holding that Resale Price Method (RPM) was most appropriate method for determining arms length om price of Assessee's international transaction in respect of import of finished goods. B 4] Mr. Pinto, submits that Transfer Pricing Officer was justified in holding that this would not be appropriate method because value of goods originally transferred to Assessee and contribution of value of final product cannot be evaluated thereby making 2/5 ::: Uploaded on - 14/11/2014 ::: Downloaded on - 03/05/2016 19:13:43 ::: *3* 901.itxa1046.12 RPM as applicable method. Tribunal should have noted that rt department had pointed out that Assessee has business in two segments, namely, manufacturing and distribution. Transfer Pricing ou Officer ('TPO' for short) has not made any adjustment in respect of business of manufacturing segment of Assessee. However, in respect C of business of distribution, TPO suggested adjustment of Rs.4,90,07,000/ by applying transactional net margin method and h rejected RPM adopted by Assessee because TPO found that ig Assessee is incurring losses consistently. Hence, pricing policy is not at H arms length. gross margin in case of comparable cases cannot be relied upon because of product differences of comparable companies. It is, then, found by TPO that Assessee had to incur several y ba expenses including promotional and advertising, that is why stand of departmental representative should have been accepted. om 5] Mr. Pardiwalla, learned Senior Counsel, appearing on behalf of Assessee, on other hand, submitted that questions of law cannot be termed as substantial because in Assessee's own case, Resale B Prince Method was accepted. It was accepted in subsequent assessment years and even prior one. It is not that these expenses which are required to be incurred for purposes of establishing Assessee's 3/5 ::: Uploaded on - 14/11/2014 ::: Downloaded on - 03/05/2016 19:13:43 ::: 901.itxa1046.12 presence in local or domestic market would make any difference and rt to such extent so as to reject RPM. Tribunal's findings of fact at para 17 and 18 are, therefore, not raising any substantial question of law. ou They cannot be termed as perverse. C 6] Mr. Pardiwalla, relies upon order passed by this Court in case of this Assessee in Income Tax Appeal No.2320 of 2011 decided on 22 nd h March, 2013. 7] ig After having perused relevant part of order passed by H Commissioner and Tribunal on this question, we are in agreement with Mr. Pardiwalla that Tribunal did not commit any error of law apparent on face of record nor can findings can be said to be y perverse. Tribunal has found that TPO has passed order earlier ba accepting this method. Tribunal has noted in para 19 of order under challenge that this method is one of standard method and om OECD (Organization of Economic Commercial Development) guidelines also state in case of distribution or marketing activities when goods B are purchased from associated entities and there are sales effected to unrelated parties without any further processing, then, this method can be adopted. findings of fact are based on materials which have been produced before Commissioner as also Tribunal. Further, it was 4/5 ::: Uploaded on - 14/11/2014 highlighted before Commissioner as also Tribunal that RPM rt has been accepted by TPO in preceding as well as succeeding assessment years. That is in respect of distribution segment activity of ou Assessee. In such circumstances, and when no distinguishing features were noted by Tribunal, it did not commit any error in allowing C Assessee's Appeal. Such findings do not raise any substantial question of law. Appeal is devoid of merits and is, therefore, dismissed. There h would be no orders as to costs. (A. A. SAYED, J.) (S.C. DHARMADHIKARI, J.) ba om wadhwa B The Commissioner of Income-tax 6 v. L'Oreal India P. Ltd