INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “H”: NEW DELHI BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND SHRI VIMAL KUMAR, JUDICIAL MEMBER (Assessment Year: 2018-19)

Massimo Dutti India Pvt. Ltd, Vs. ACIT, Unit No. 1 (Office 1) 8^th Floor, Circle-1(1), Ambience Island, NH-8, Gurgaon Gurugram, Hayana-122 002 (Appellant) (Respondent)

PAN: AAJCM0103G Assessee by : Shri Ravi Sharma, Adv Ms. Shruti Khimta, Adv Ms. Kashish Gupta, CA Revenue by: Shri S. K. Jadav, CIT DR Date of Hearing 11/09/2025 Date of pronouncement 08/12/2025

O R D E R

PER M. BALAGANESH, A. M.:

1. The Assessee Massimo Dutti India Pvt. Ltd. (hereinafter referred to as „assessee) by filing the present appeal sought to set aside the impugned order dated 19.07.2022 passed by the Assessing Officer (AO) under section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (for short „the Act‟) inconsonance with the order passed by the Dispute Resolution Panel (DRP) dated 07.06.2022 u/s 144C(5) and order of TPO dated 15.09.2022 passed u/s 92CA(3).

2. The Ground No. 1 raised by the Assessee is general in nature and does not require any specific adjudication.

3. The Ground Nos. 2 and 3 raised by the Assessee are challenging the Transfer Pricing adjustment with respect to international transaction pertaining to import of finished goods.

4. We have heard the rival submissions and perused the materials available on record. The Assessee was incorporated on 12-12-2013 as a joint venture between Grupo Massimo Dutti S.A (Massimo Dutti Spain) and Trent, the retail arm of the Tata group. The Assessee is engaged in the fashion retail business and operates the „Massimo Dutti‟ chain of retail stores in India which sells garments, shoes and accessories. The Assessee is a „routine distributor‟ and assumes all routine risks associated with its local business operations and employs routine tangible assets. During the year under consideration, amongst others, the Assessee entered into an international transaction with respect to import of finished goods from its Associated Enterprise (AE) for resale in India. For benchmarking the impugned international transaction, the Assessee selected „Resale Price Method‟ (RPM) as the Most Appropriate Method (MAM) with Gross profit /Sales as the relevant Profit Level Indicator (PLI). The Assessee considered itself as the tested party. The tested party‟s margin was 45.65%. The Assessee selected few comparables which are engaged in the similar line of activity and the average margin of the comparables was 31.16%. Accordingly, the Assessee considered its international transaction with respect to import of finished goods with its AE to be at Arm's Length Price (ALP).

5. The Learned TPO rejected the RPM applied by the Assessee as the MAM by holding that Assessee is not a mere routine distributor and it had incurred costs mandated by its AE in brand building, promotion, marketing, advertising and creation of intangibles. Accordingly, the Learned TPO applied Transactional Net Margin Method (TNMM) as the MAM and correspondingly substituted the PLI with Operating Profit / Operating Revenue (OP/OR) to ascertain the ALP of the international transaction of import of finished goods for resale in India. The Learned TPO also rejected the Assessee‟s claim of fixed cost (rent) adjustment and accordingly recomputed the Assessee‟s operating margin at - 4.35 %. The Learned TPO, however, accepted the selection of comparables of the Assessee in its Transfer Pricing Study Report (TPSR). The comparables margin using TNMM and the PLI of OP / OR was arrived at 5.79 % and when this was compared with the Assessee‟s operating margin of - 4.35 %, the Learned TPO proposed a Transfer Pricing adjustment of Rs. 4,63,82,408/-.

6. Since the Learned TPO while applying TNMM as the MAM for benchmarking the import of finished goods did not grant the working capital adjustment to the Assessee, the Learned DRP directed the Learned TPO to re-verify the working capital adjusted margins of the comparable compa