The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that the Resale Price Method (RPM) is the Most Appropriate Method (MAM) for benchmarking imports of finished goods from Associated Enterprises (AEs) where the goods are resold without any value addition, and accordingly deleted a transfer pricing adjustment of ₹4.08 crore made by the Transfer Pricing Officer (TPO). 

The bench of Sudhir Kumar, (Judicial Member) and M. Balaganesh (Accountant Member) has observed that there was no physical alteration, processing, or enhancement of the imported products before resale. It further found that the department had failed to produce any evidence showing that the assessee had added economic value to the products or employed intangible assets in a manner that transformed the imported goods.

The decision came in the case of Beam Global Spirits and Wine (India) Pvt. Ltd. for the Assessment Year 2011-12, where the Tribunal allowed the assessee’s appeal on the core transfer pricing issue while holding that the tax authorities had wrongly rejected the Resale Price Method in favour of the Transactional Net Margin Method (TNMM). 

Buy Now: Income Tax (Direct Tax) Judgments Monthly E-Magazine – May 2026

Beam Global Spirits and Wine (India) Pvt. Ltd. is engaged in the manufacture and sale of alcoholic beverages in India. During the relevant assessment year, the company imported bottled alcoholic beverages from its overseas Associated Enterprises for resale in India.

The dispute was confined to the distribution segment, under which imported finished products were sold in India without any further processing. The distribution business constituted approximately 3.56% of the company’s total turnover. 

The assessee benchmarked its international transaction using the Resale Price Method (RPM), treating it as the Most Appropriate Method under the transfer pricing regulations. Based on its transfer pricing study, the company’s gross profit margin was significantly higher than that of comparable entities, demonstrating that the transaction was at arm’s length. 

The Transfer Pricing Officer rejected the assessee’s benchmarking analysis, holding that the company was not merely a routine distributor.

According to the TPO, the assessee had incurred substantial advertising, marketing and promotional expenditure, which allegedly resulted in the creation of local marketing intangibles. On this reasoning, the TPO discarded RPM and adopted the Transactional Net Margin Method (TNMM) as the Most Appropriate Method.

Applying TNMM, the TPO proposed a transfer pricing adjustment of ₹4,08,80,300 in relation to the import of finished goods from Associated Enterprises. The Commissioner of Income Tax (Appeals) upheld this approach. 

Reversing the findings of the lower authorities, the ITAT observed that the assessee merely imported bottled alcoholic beverages from its overseas Associated Enterprises and sold them to unrelated customers in India.

Consequently, the Tribunal held that the assessee functioned only as a routine distributor, making RPM the appropriate transfer pricing method. 

A key argument advanced by the Revenue was that the assessee had incurred substantial selling, distribution and promotional expenses, indicating that it had created valuable marketing intangibles.

The Tribunal rejected this contention, holding that expenditure on advertising and promotion cannot by itself justify replacing RPM with TNMM.

It explained that RPM compares gross profit margins, whereas selling and marketing expenses are recorded below the gross profit line in the profit and loss account. Therefore, the magnitude of such expenditure has no bearing on determining the arm’s length price under RPM.

The Bench observed that if the Revenue believed that advertising and marketing expenditure warranted a separate transfer pricing adjustment, such adjustment ought to have been independently examined rather than rejecting RPM altogether. 

The Tribunal also noted that the Delhi High Court had affirmed the principle laid down in Burberry India Pvt. Ltd., reinforcing that RPM is the preferred method where imported products are sold as such without any processing or value addition. 

The ITAT further observed that in the assessee’s own cases for Assessment Years 2012-13 and 2013-14, the Transfer Pricing Officer had accepted RPM as the appropriate benchmarking method.

Since there was no material change in the facts or business model during the relevant assessment year, the Tribunal held that there was no justification for deviating from the earlier accepted position. 

Allowing the transfer pricing grounds raised by the assessee, the ITAT directed the Transfer Pricing Officer to adopt the Resale Price Method for benchmarking the international transaction relating to imports from Associated Enterprises.

The Tribunal held that once RPM was accepted as the Most Appropriate Method, the remaining transfer pricing issues became academic.

While the Tribunal observed that the levy of interest under Sections 234B and 234D was consequential, it dismissed the challenge to the initiation of penalty proceedings under Sections 271G and 271(1)(c) as premature.

Accordingly, the appeal was partly allowed in favour of the assessee. 

Membership Required to Access Case Details & Order Copy

To view the complete Case Details and Download Order Copy, you must have an active membership. Please subscribe to continue.

Read More: Time-Barred SCN Can’t Sustain Service Tax Demand: CESTAT