RPM is the most suitable method, when there is no value addition before resale: ITAT Delhi


RPM is the most suitable method, when there is no value addition before resale: ITAT Delhi


D Light Energy P. Ltd. Vs Assessing Officer (ITAT Delhi) Appeal Number : ITA No.516/DEL/2022


D Light Energy P. Ltd. (the assessee) purchases solar products such as lanterns and lights from its Associated Enterprises (AEs) abroad and resells them in India without any value addition.

The assessee applied the Resale Price Method (RPM) to benchmark the purchase of solar goods, citing that no value addition was made before resale. For reimbursement of expenses and warranty claims, another method was applied.

The Transfer Pricing Officer (TPO) rejected RPM and applied the Transactional Net Margin Method (TNMM), arguing that warranty claims and other expenses were inherently linked to the purchase of solar goods. The TPO aggregated these transactions and made adjustments.

The Dispute Resolution Panel (DRP) upheld TNMM as the most appropriate method, despite objections from the assessee regarding the comparables chosen and the functional dissimilarities of additional companies included by the DRP.

The assessee appealed to the Income Tax Appellate Tribunal (ITAT) against the TPO’s decision, arguing that RPM should have been accepted as the most appropriate method due to the lack of value addition before resale.

ITAT Delhi held as below:

The assessee’s business primarily involved the resale of solar goods without substantial value addition, particularly targeting rural areas where electricity was scarce. This operational model supported the applicability of RPM.

While the total expenses for reimbursement and warranty claims were relatively small compared to the purchase cost of solar goods, they did not justify rejecting RPM in favor of TNMM.

RPM is appropriate when no significant value addition is undertaken before resale.


The Copy Of the Order is as Under:

1718005198-516 D Light Energy P Ltd.