Yamaha Motor India Pvt. Ltd vs. ACIT (ITAT Delhi)

The argument of the department that under Rule 10B(1)(b) the Resale Price Method can be applied only when the assessee buys from an associated enterprise and sells to a non-associated enterprise and not when the sale is to an AE is not correct. As per the Rule 10B(1)(b), under the Resale Price Method the price at which property purchased or services obtained is sold to an unrelated enterprise, the price at which this property is sold less margin of the associated enterprise is to be reduced for determination of the resale arm’s length price. There is no condition that this method cannot be used when the tested party is an associated enterprise. The contention of the learned DR that the basic condition of resale price method is that “the property has to be obtained by the enterprise i.e. the assessee from an associated enterprise is incorrect.” In the Act as well as Rules the words ‘enterprise’ and ‘associated enterprise’ have been used interchangeably. Thus the argument that enterprise will mean ‘the assessee’ and associated enterprise will mean’ the other party’ to whom the assessee has sold or purchased the goods is incorrect. The above definition of ‘enterprise’ and ‘associated enterprise’ in the Act nowhere indicates that the ‘enterprise’ shall mean the assessee and the ‘associated enterprise’ will mean other than the assessee. Thus the contention of the learned DR that resale price method cannot be used in the case of the assessee company is devoid of any merit. This view gets further supported by the fact that there is no such condition or prohibition provided in Section 92C as well as Rule 10B. In the absence of any such condition or prohibition it cannot be read into the Rule to mean that resale price method shall not be applicable in case the assessee company is selling its product to an associated enterprise. The OECD guidelines in respect of resale price method support this interpretation.