Mubea Automotive Components India Private Limited, Pune V. Deputy Commissioner of Income tax, Pune

ITA 260/PUN/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 3649 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 02-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Transfer pricing; International transaction
• Section: 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH, C PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER . / ITA NO.260/PUN/2017 / ASSESSMENT YEAR : 2012-13 MUBEA AUTOMOTIVE COMPONENTS INDIA PRIVATE LIMITED (FORMERLY KNOWN AS MUBEA SUSPENSION INDIA PRIVATE LIMITED), SURVEY NO.1072, POST. PIRANGUT, TALUKA MULSHI, DIST. PUNE 412 111 PAN : AAACT9025D VS. DCIT, CIRCLE-14, PUNE APPELLANT RESPONDENT / ORDER PER R.S. SYAL, VP : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE FINAL ASSESSMENT ORDER DATED 26-12-2016 PASSED BY THE ASSESS ING OFFICER (AO) U/S.143(3) R.W.S. 144C(13) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER ALSO CALLED THE ACT) IN RELATION TO THE ASSESSMEN T YEAR 2012-13. 2. SUCCINCTLY, THE FACTUAL PANORAMA OF THE CASE IS THAT THE A SSESSEE IS A COMPANY ENGAGED IN MANUFACTURING OF CAR SUSPENSION RELATED PRODUCTS LIKE COIL SPRINGS, STABILIZER BARS, TORSION BARS, STRUT BARS. IT FILED ITS RETURN DECLARING TOTAL LOSS OF RS.4,99,75,300/-. C ERTAIN ASSESSEE BY SHRI NIKHIL PATHAK REVENUE BY SHRI SHEKHAR L. GAJBHIYE & SHRI MAHADEVAN A.M. KRISHNAN DATE OF HEARING 11-10-2021 DATE OF PRONOUNCEMENT 13-10-2021 ITA NO.260/PUN/2017 MUBEA AUTOMOTIVE COMPONENTS INDIA PVT. LTD., 2 INTERNATIONAL TRANSACTIONS WERE REPORTED IN FORM NO. 3CEB. TH E AO MADE A REFERENCE TO THE TRANSFER PRICING OFFICER (TPO) F OR DETERMINING THE ARMS LENGTH PRICE (ALP) OF THE INTERNATIONAL TRANSACTIONS. IN THIS APPEAL, WE ARE CONCERNED ONLY WITH THE FIRST INTERNATIONAL TRANSACTION VIZ., `PURCHASE OF RAW MATERIALS, FINIS HED GOODS, SPARES AND CONSUMABLES WITH TRANSACTED VALUE OF RS.18,05,55,266/-. THE ASSESSEE APPLIED THE COMPARABLE UNCONTROLLED TRANSACTION (CUP) METHOD FOR DEMONSTRATING THAT THE INTERNATIONAL TRANSACTION WAS AT ALP BY MENTIONING IN ITS TRANSFER PRICING STUDY REPORT THAT : `MSIL HAS PURCHASED RAW MATERIAL , FINISHED GOODS AND SPARES AND CONSUMABLES FROM ITS GROUP ENTITIES FOR THE F.Y. 2011-12. MUBEA GROUP ENTITIES HAVE SOLD IDENTIC AL OR SIMILAR RAW MATERIAL/FINISHED GOODS/SPARE PARTS/CONSUMABLES TO THIRD PARTIES AS SOLD TO MSIL AND DATA FOR SUCH TRANSACTIONS IS AVA ILABLE. THE TPO MISJUDGED THE TRANSACTION OF PURCHASE OF RAW MATERIA LS AND FINISHED GOODS ETC. AS THAT OF SALES AND REJECTED THE CUP METH OD WITH THE OBSERVATIONS GIVEN IN PARA 6.1., WHICH FAIRLY INDICATE THAT THE ENTIRE EXERCISE DONE BY HIM IS IN THE REALM OF THE ASSESS EE HAVING MADE SALES OF RAW MATERIALS AND FINISHED GOODS ETC. TO THE ASSOCIATED ENTERPRISES (AES) AS AGAINST THE ACTUAL TRANSACTIONS OF PURCH ASE. AFTER REJECTING THE CUP METHOD, THE TPO ADOPTED TRANSACTIONAL N ET MARGIN METHOD (TNMM) AS THE MOST APPROPRIATE METHOD. HE C HOSE ITA NO.260/PUN/2017 MUBEA AUTOMOTIVE COMPONENTS INDIA PVT. LTD., 3 SIX COMPANIES AS COMPARABLES WITH THEIR MEAN OPERATING PROFIT/OPERATING COST AT 10.47%. APPLYING IT AS THE BENCHMAR K, HE DETERMINED THE ALP AND NOTIFIED THE CONSEQUENTIAL TRANSFER PRICIN G ADJUSTMENT AT RS.16,61,20,496/-. THE DISPUTE RESOLUTION PA NEL (DRP) CORRECTED THE TPOS MISUNDERSTANDING OF THE NATURE O F TRANSACTION AS SALE INSTEAD OF THE ACTUAL TRANSACTION OF PURCHA SE. IT HOWEVER, DID NOT COUNTENANCE THE CUP AS THE MOST APPROPRIATE METHOD AND APPROVED THE APPLICATION OF THE TNMM. OUT OF SIX COMPARABLES CHOSEN BY THE TPO, THE DRP EXCLUDED THREE COMP ANIES GIVEN AT SL. NOS. 1, 2 AND 6 ON PAGES 23 AND 24 OF THE T POS ORDER. THIS IS HOW, THE AO PASSED THE FINAL ASSESSMENT ORDER DETE RMINING THE AMOUNT OF TRANSFER PRICING ADJUSTMENT AT RS.10,33,29,49 2/-, AGAINST WHICH THE ASSESSEE HAS COME UP IN APPEAL BEFORE THE TRIBUNAL. 3. WE HAVE HEARD BOTH THE SIDES AND GONE THROUGH THE R ELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS RAISED TWO FOLD CO NTENTIONS. FIRSTLY, THAT THE CUP METHOD SHOULD BE APPLIED FOR DETERMINING THE ALP OF THE INTERNATIONAL TRANSACTION AND SECONDLY, IN THE ALTERNA TIVE AND WITHOUT PREJUDICE, IF THE TNMM IS TO BE APPLIED, THEN THE TRANSFER PRICING ADJUSTMENT SHOULD BE RESTRICTED TO PROPORTION ATE BASIS. WE PROCEED TO EXAMINE AND EVALUATE THE CONTENTIONS. ITA NO.260/PUN/2017 MUBEA AUTOMOTIVE COMPONENTS INDIA PVT. LTD., 4 I. WHETHER CUP IS THE MOST APPROPRIATE METHOD: 4. IT IS SEEN THAT THE ASSESSEE APPLIED THE CUP AS THE MOST APPROPRIATE METHOD, WHICH GOT REPELLED AT THE HANDS OF THE AUTHORITIES BELOW. IN ORDER TO PROPERLY APPRECIATE THE CONTENTIONS, IT WO ULD BE BEFITTING TO NOTE THE MECHANISM FOR DETERMINING THE ALP UNDER TH E CUP METHOD AS ENSHRINED UNDER RULE 10B(1)(A). IT CONTEMPLA TES COMPARING THE PRICE PAID IN AN INTERNATIONAL TRANSACTION WITH THE P RICE PAID IN A COMPARABLE UNCONTROLLED TRANSACTION BY FURTHER PRO VIDING THAT IF THERE ARE DIFFERENCES IN THE INTERNATIONAL TRANSACTION AND THE COMPARABLE UNCONTROLLED TRANSACTION WHICH MATERIALLY AFFECT THE PRICE, THEN THE PRICE OF THE COMPARABLE UNCONTROLLED TRANSACTIO N SHOULD BE SUITABLY ADJUSTED SO AS TO RENDER IT FIT FOR COMPARIS ON WITH THE PRICE PAID IN AN INTERNATIONAL TRANSACTION. 5. THE ASSESSEE PURCHASED RAW MATERIALS, FINISHED GOODS, SPARES AND CONSUMABLES AGGREGATING TO RS.18.05 CRORE FROM ITS A ES. THE MAJOR COMPONENT IS PURCHASE OF RAW MATERIAL FROM FOUR AES , NAMELY, EACH FROM SPAIN, USA, CHINA AND GERMANY, TOTALING RS.15.08 CRORE. THE ASSESSEE PURCHASED FINISHED GOODS FROM TWO AES, NA MELY, EACH FROM GERMANY AND ITALY AMOUNTING TO RS.2.87 CRORE. THE ASSESSEE PURCHASED STORES, SPARES AND CONSUMABLES FOR THE REMAININ G TRIVIAL AMOUNT FROM ITS AES. ITA NO.260/PUN/2017 MUBEA AUTOMOTIVE COMPONENTS INDIA PVT. LTD., 5 6. FIRSTLY, WE ESPOUSE THE PURCHASE OF RAW MATERIALS. THE ASSESSEE PURCHASED DIFFERENT TYPES OF RAW MATERIALS FROM THE FOUR AES SITUATED IN DIFFERENT COUNTRIES AND THEN IN ORDER TO PROVE THAT THE PUR CHASE TRANSACTIONS OF RAW MATERIAL WERE AT ALP, IT APPLIED THE CUP M ETHOD BY COMPARING THE PRICE PAID IN TRANSACTIONS WITH ALL THE FOUR A ES WITH THE PRICE CHARGED BY GERMAN AE FROM A GERMAN NON-A E, NAMELY, `H&R SPEZIALFEDERN. THE PURCHASE BY THE ASSESS EE FROM ITS GERMAN AE IS ONLY WORTH 1,224 EUROS AS AGAINST THE SALE MADE BY GERMAN AE TO A GERMAN NON-AES AT 20,85,856 EUROS. IT IS ON THE BASIS OF THIS PRICE CHARGED BY THE GERMAN AE FROM A GERM AN NON- AE THAT THE ASSESSEE TRIED TO SHOW THAT ITS PURCHASES OF RA W MATERIALS FROM ALL THE FOUR AES WERE AT THE ALP. WE HAVE EXAMINED SOME OF THE INVOICES RAISED ON THE ASSESSEE BY TWO AES, NAMELY, FROM SPAIN AND CHINA. THE ASSESSEE PURCHASED STEEL WIRE IN COIL FROM ITS AE IN SPAIN IN DIFFERENT DIAMETERS @ 1170 EUROS PER 1000 KGS. THIS RATE PREVAILED UPTO 31 ST DECEMBER, AFTER WHICH THE RATE WAS SLASHED DOWN TO 1100 EUROS PER 1000 KGS. INSOFAR AS PURCHASES FR OM CHINESE AE ARE CONCERNED, THE ASSESSEE PURCHASED ITW (INDUCTION T AMPERED WIRE) WITH DIFFERENT DIMENSIONS AT 1580 EUROS PER 1000 KGS . THIS RATE CONTINUED UPTO DECEMBER, AFTER WHICH IT WAS REDUCED TO 1331 EUROS FROM 1000 KGS. THE ASSESSEE HAS NOT FURNISHED ANY INVOICE OF IMPORT FROM ITS US AND GERMAN AES. THE DRP HAS TABULATED THE ITA NO.260/PUN/2017 MUBEA AUTOMOTIVE COMPONENTS INDIA PVT. LTD., 6 ASSESSEES SUBMISSION ON PAGE 5 OF ITS DIRECTIONS GIVING BR EAK-UP OF TOTAL VALUE OF PURCHASES, QUANTITY, AND AVERAGE PRICE PAID B Y THE ASSESSEE TO ITS FOUR AES WITH THE PRICE CHARGED BY THE GE RMAN AE FROM A NON-AE. ON AN ANALYSIS OF THE TABLE, IT EMERGES THA T THE ASSESSEE PURCHASED TOTAL OF 16,87,501 KGS FROM ITS AE IN SPAIN; 2,54,113 KGS FROM ITS AE IN THE USA; 1,14,947 KGS FROM ITS CHINESE AE; AND 1,000 KGS FROM ITS GERMAN AE. IN THE NAME OF COMPARABLE UNCONTROLLED TRANSACTION, THE ASSESSEE HAS GIVEN ONLY THE TRAN SACTIONS OF SALE MADE BY ITS GERMAN AE TO SOME GERMAN NON-AE. WHEREAS PURCHASES FROM SPAIN, USA AND CHINA CONSTITUTE 99.95%, THE ASSESSEE HAS GIVEN NO COMPARABLE DATA OF THESE AES SUPP LYING SIMILAR RAW MATERIAL TO ANY OTHER NON-RELATED ENTITY IN INDIA. AS REGARDS THE REMAINING 0.05%, THE ASSESSEE HAS PLACED NO INVOICES OF THE PURCHASES MADE FROM ITS GERMAN AE, THOUGH IT PUT FORTH COPIES OF INVOICES RAISED BY THE GERMAN AE ON GERMAN NON-AES. AS SUCH, NO DATA OF THE PRICE CHARGED BY THE GERMAN AE FROM THE A SSESSEE IS AVAILABLE, WHICH COULD BE COMPARED WITH THE PRICES CHARGED B Y THE FORMER FROM NON-AES FOR ASCERTAINING IF THE PRODUCTS SOLD ARE SIMILAR OR DIFFERENT. THUS, IT IS MANIFESTED THAT THE ASSESSEE HAS M ADE COMPARISON OF THE AVERAGE RATE CHARGED BY GERMAN AE FR OM GERMAN NON-AES WITH THE AVERAGE RATE CHARGED BY ALL THE FOUR AES FROM DIFFERENT COUNTRIES SELLING RAW MATERIAL TO THE ASSESSEE IN INDIA . ITA NO.260/PUN/2017 MUBEA AUTOMOTIVE COMPONENTS INDIA PVT. LTD., 7 7. AT THIS JUNCTURE, IT IS RELEVANT TO HIGHLIGHT THAT THE CUP METHOD REQUIRES A GREATEST DEGREE OF COMPARABILITY BETWEEN THE INTE RNATIONAL TRANSACTION AND THE COMPARABLE UNCONTROLLED TRANSACTION(S). I T IS NOT ONLY THE PRODUCTS AS SUCH, BUT ALSO SEVERAL OTHER RELEVANT FACTORS, WHICH NEED TO BE TAKEN INTO CONSIDERATION BEFORE JUMPING TO TH E VERACITY OF CONCLUSION OF COMPARABILITY. RULE 10B(2) OF THE INCOME- TAX RULES, 1962 CATEGORICALLY PROVIDES THAT: `THE COMPARABILITY OF AN INTERNATIONAL TRANSACTION WITH AN UNCONTROLLED TRANSACTION SHALL BE JUDGED WITH REFERENCE TO THE FOUR BROADER PARAMETERS GIV EN IN CLAUSES (A) TO (D). CLAUSE (D), WHICH ASSUMES SIGNIFICAN CE IN THE EXTANT CASE, PROVIDES AS FOLLOWS CONDITIONS PREVAILING IN THE MARKETS IN WHICH THE RESPECTIVE PARTIES TO THE TRANSACTIONS OPERATE, INCLU DING THE GEOGRAPHICAL LOCATION AND SIZE OF THE MARKETS, THE LAWS AND GOVERNMENT ORDERS IN FORCE, COSTS OF LABOUR AND CAPITAL IN THE MARKETS, OVERALL ECONOMIC DEVELOPMENT AND LEVEL OF COMPETITION AND WHETHER THE MARKETS ARE WHOLESALE OR RETAIL . ON GOING THROUGH THE MANDATE OF CLAUSE (D) OF RULE 10B(2), IT BECOMES GRAPHICA LLY OVERT THAT THE COMPARABILITY OF AN INTERNATIONAL TRANSACTION WITH AN UNCONTROLLED TRANSACTION HAS TO BE JUDGED, INTER ALIA, BY CONSIDERING CONDITIONS PREVAILING IN THE MARKETS IN WHICH RESPECTIVE PARTIES TO THE TRANSACTION OPERATE INCLUDING THE GEOGRAPHICAL LOCATIONS. RULE 10B(3) STATES THAT: `AN UNCONTROLLED TRANSACTION SHALL BE COMPA RABLE ITA NO.260/PUN/2017 MUBEA AUTOMOTIVE COMPONENTS INDIA PVT. LTD., 8 TO AN INTERNATIONAL TRANSACTION, . IF (I) NONE OF THE DIFFEREN CES, IF ANY, BETWEEN THE TRANSACTIONS BEING COMPARED, OR BETWEEN THE ENTERPRISES ENTERING INTO SUCH TRANSACTIONS ARE LIKELY TO MATER IALLY AFFECT THE PRICE PAID IN ..SUCH TRANSACTIONS IN THE OPEN MA RKET; OR (II) REASONABLY ACCURATE ADJUSTMENTS CAN BE MADE TO ELIMINATE THE MATERIAL EFFECTS OF SUCH DIFFERENCES. ON A CONJOINT READIN G OF RULE 10B(2) WITH RULE 10B(3), IT BECOMES OSTENSIBLE THAT AN UNCON TROLLED TRANSACTION CAN BE TAKEN INTO CONSIDERATION FOR COMPARISON O NLY IF NO DIFFERENCES, INTER ALIA, THE VARYING GEOGRAPHICAL LOCATIONS EXIST AND FURTHER IN CASE SUCH DIFFERENCES EXIST, THERE SHOULD BE A MECHANISM TO ELIMINATE THE MATERIAL EFFECTS OF SUCH DIFFERENCES IN A REA SONABLY ACCURATE WAY. IN OTHER WORDS, IF NO REASONABLE ACCURATE ADJUSTMENT CAN BE MADE TO ELIMINATE SUCH MATERIAL EFFECTS, THEN THE COM PARABLE HAS TO BE EASED OUT. 8. REVERTING TO THE FACTUAL POSITION OBTAINING IN THE EXTANT CA SE, WE FIND THAT THE SO-CALLED COMPARABLE TRANSACTION, NAMELY, THE GE RMAN AES TRANSACTIONS WITH ANOTHER GERMAN NON-AE ARE GEOGRAP HICALLY DIFFERENT FROM THE ASSESSEES TRANSACTIONS WITH THE OTHER THR EE ENTITIES SITUATED IN SPAIN, USA AND CHINA SUPPLYING RAW MATERIAL TO THE ASSESSEE IN INDIA. FURTHER, INSOFAR AS THE TRANSACTIONS WITH THE GERMAN AE ARE CONCERNED, NOT ONLY THE ASSESSEE DID NOT FURNISH ANY PARTICULARS OF RAW MATERIAL PURCHASED FROM IT BUT ALSO THAT THE RE IS ITA NO.260/PUN/2017 MUBEA AUTOMOTIVE COMPONENTS INDIA PVT. LTD., 9 HUGE DIFFERENCE IN THE MINUSCULE VOLUME PURCHASED BY THE A SSESSEE AT 1,000 KG WITH THAT SOLD BY THE GERMAN AE TO GERMAN NON- AE AT 14,52,170 KGS. IT GOES WITHOUT SAYING THAT A PARTICULAR PROD UCT COMMANDS VARYING PRICE IN DIFFERENT COUNTRIES DUE TO HOST OF REASONS. FOR THE PURPOSES OF THE ALP DETERMINATION UNDER THE CUP METHO D, WE NEED TO FOCUS ON THE COMPARABLE UNCONTROLLED TRANSACTIONS TAKING PLACE IN INDIA AND NOT WORLD OVER. AS THE PRODUCT SIMILARIT Y IS ALSO ANOTHER SINE QUA NON UNDER THE CUP METHOD, THE BEST COMPARABLE UNCONTROLLED TRANSACTIONS IN THE GIVEN CASE WOULD HAVE BEEN THE FOUR AES SELLING SIMILAR PRODUCTS TO NON-AES IN INDIA. THE ASSES SEE PURCHASING SIMILAR PRODUCTS FROM NON-AES OR A THIRD PARTY IN INDIA PURCHASING SIMILAR GOODS IN AN UNCONTROLLED SITUATION WOULD HAV E CONSTITUTED THE NEXT BEST COMPARABLE UNCONTROLLED PRICE(S). N EITHER THE BEST NOR THE NEXT BEST COMPARABLE UNCONTROLLED TRANSACTIONS ARE AVAILABLE AND FURTHER, THE ASSESSEE HAS PROVIDED NO BASIS TO CREASE OUT THE EFFECT OF GEOGRAPHICAL DIFFERENCES IN THE TRANSACTION SO CHOSEN AS COMPARABLE IN TERMS OF RULE 10B(3). IN SUCH CIRCUMSTANCE S, WE FAIL TO COMPREHEND AS TO HOW THE SALE TRANSACTIONS MADE BY GERMA N AE TO NON-GERMAN AES CONSTITUTE VALID COMPARABLE UNCONTROLLED TRANSACTIONS INSOFAR AS THE ASSESSEES PURCHASES OF R AW MATERIAL FROM SPAIN, USA, CHINA AND GERMANY ARE CONCERNED. ITA NO.260/PUN/2017 MUBEA AUTOMOTIVE COMPONENTS INDIA PVT. LTD., 10 9. NOW WE COME TO THE REMAINING PART OF THE INTERNATIONAL TRANSACTION OF PURCHASE OF FINISHED GOODS. IT IS SEEN THAT TH E ASSESSEE MADE FINISHED GOODS PURCHASES FROM ITS GERMAN AE AS WELL AS ITALIAN AE. IN ORDER TO BENCHMARK THESE TRANSACTIONS, THE ASSES SEE RELIED ON A TRANSACTION OF SALE MADE BY ITS ITALIAN AE TO GERMAN NON-A E. IT HAS BEEN FAIRLY CONCEDED THAT NO COMPARABLE DATA OF THE S ALES MADE BY GERMAN AE TO NON-AE IS AVAILABLE. GEOGRAPHICAL D IFFERENCES, AS NOTED ABOVE, DO NOT JUSTIFY THE ADOPTION OF THE PRICE CHAR GED BY ITALIAN AE FROM A GERMAN NON-AE AS A GOOD COMPARABLE FO R THE PURPOSES OF BENCHMARKING THE INTERNATIONAL TRANSACTIONS IN IND IA. THE RAISON DETRE GIVEN IN THE CONTEXT OF PURCHASE OF RAW MATERIALS SUPRA APPLIES WITH EQUAL FORCE TO THE PURCHASE OF FINISHED GOODS FROM THE AES FOR WHICH NO WORTHWHILE COMPARABLE UNCONTROLLED TRANSACTION IS AVAILABLE. 10. NO SEPARATE ARGUMENT WAS ADVANCED QUA THE REMAINING PART OF THE TRANSACTION UNDER CONSIDERATION, NAMELY, PURCHASE OF STO RES, SPARES AND CONSUMABLES FROM THE AES. 11. WE, THEREFORE, APPROVE THE VIEW POINT TAKEN BY THE AUTHORITIES BELOW TO THE EFFECT THAT THE CUP IS NOT THE MOST APPROPRIATE METHO D IN THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NO.260/PUN/2017 MUBEA AUTOMOTIVE COMPONENTS INDIA PVT. LTD., 11 II. IF TNMM IS TO BE APPLIED, THEN PROPORTIONATE ADJUSTMENT SHOULD BE MADE 12. AFTER HOLDING THAT THE CUP METHOD CANNOT BE APPLIED, WE NO W PROCEED WITH THE ALTERNATE AND WITHOUT PREJUDICE ARGUMENT PUT F ORTH ON BEHALF OF THE ASSESSEE THAT THE TRANSFER PRICING ADJUST MENT SHOULD BE RESTRICTED ONLY TO THE INTERNATIONAL TRANSACTIONS AND NOT TO TH E NON- AE TRANSACTIONS AS WELL. WE HAVE NOTICED ABOVE THAT THE TPO SELECTED SIX COMPANIES AS COMPARABLE AND DETERMINED THEIR AR MS LENGTH MARGIN AND THEREAFTER APPLIED THE SAME TO THE SALES MA DE BY THE ASSESSEE ON ENTITY LEVEL. THE DRP DIRECTED TO EXCLUDE THRE E COMPANIES FROM SUCH LIST. THE LD. AR SUBMITTED THAT IF THE CUP METHOD IS NOT TO BE ADOPTED AS THE MOST APPROPRIATE METHOD, TH EN HE HAS NO GRIEVANCE AGAINST THE APPLICATION OF THE TNMM OR ANY OF ITS OTHER ASPECTS EXCEPT RESTRICTING THE TRANSFER PRICING ADDITION PROPORTIONATE TO THE INTERNATIONAL TRANSACTIONS. 13. THE ISSUE OF PROPORTIONATE ADJUSTMENT IS FAIRLY SETTLED BY A JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. PHOENIX MECANO (INDIA) PVT. LTD. (2019) 414 ITR 704 (BOM.), HOLDING THAT THE TRANSFER PRICING ADJUSTMENT MADE AT ENTITY LEVEL SHOULD BE RESTR ICTED TO THE INTERNATIONAL TRANSACTIONS ONLY. IT IS PERTINENT TO MENTION THA T THE DEPARTMENTS SLP AGAINST THIS JUDGMENT HAS SINCE BEEN ITA NO.260/PUN/2017 MUBEA AUTOMOTIVE COMPONENTS INDIA PVT. LTD., 12 DISMISSED BY THE HONBLE SUPREME COURT IN CIT VS. PHOENIX MECANO (INDIA) PVT. LTD. (2018) 402 ITR 32 (ST.). SIMILAR VIEW HAS BEEN ESPOUSED BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. THYSSEN KRUPP INDUSTRIES PVT. LTD. (2016) 381 ITR 413 (BOM.) AND CIT VS. TARA JEWELS EXPORTS (P). LTD. (2010) 381 ITR 404 (BOM.) . WE, ERGO, DIRECT TO RESTRICT THE TRANSFER PRICING ADDITION ONLY TO THE EXTENT OF INTERNATIONAL TRANSACTION UNDER CONSIDERATION. 14. TO SUM UP, WE SET-ASIDE THE IMPUGNED ORDER AND RE STORE THE MATTER TO THE FILE OF AO/TPO FOR RE-DETERMINING THE ALP OF THE INTERNATIONAL TRANSACTION OF `PURCHASE OF RAW MATERIAL, SALE OF FINISHED GOODS, SPARES AND CONSUMABLES UNDER THE TNMM BUT RESTRICTING THE AMOUNT OF TRANSFER PRICING ADJUSTMENT ONLY TO THE INTERNATIONAL TRANSACTION. 15. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH OCTOBER, 2021. SD/- SD/- ( PARTHA SARATHI CHAUDHURY ) (R.S.SYAL) JUDICIAL MEMBER VIC E PRESIDENT PUNE; DATED : 13 TH OCTOBER, 2021 ITA NO.260/PUN/2017 MUBEA AUTOMOTIVE COMPONENTS INDIA PVT. LTD., 13 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE CIT(A)-13, PUNE 3. THE PCIT-5, PUNE 4. 5. DR, ITAT, C BENCH, PUNE / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR P RIVATE SECRETARY , / ITAT, PUNE DATE 1. DRAFT DICTATED ON 11-10-2021 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 12-10-2021 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *