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2016 (6) TMI 1322 - AT - Income TaxTPA - ALP determination - rejection of Most Appropriate Method (‘MAM’) adopted by the assessee as CPM/CUP by the TPO and adopting Transactional Net Margin Method (‘TNMM’) - comparable selection - Held that:- The assessee provides off shore software development services to its parent company (Associated Enterprise – AE) and also execute project to support engineering system or to develop software for internal use or for development of new product for AE. The assessee is compensated by its AE at cost plus mark up of 10% for the services rendered by the assessee. Following the earlier order of this Tribunal in assessee's own case this issue is decided against the assessee and confirmed the order of the TPO in adopting TNMM as MAM. Rejecting the multiyear data and adopting the current year data by the TPO -There is no dispute that as per the Rule 10B(4) as well as Rule 10D (4) so far as possible the current year and contemporaneous data has to be considered for determining comparable price. Only in the case of exceptional circumstances where current year data cannot be relied upon and does not give the true and correct state of affairs of the functional comparability then multiyear data up to 2 earlier years can be used. The assessee has failed to demonstrate that the current year data of the comparables are not reliable. Accordingly, we do not find any substance or merit in this ground of the assessee’s appeal and the same is rejected. Rejection of companies functionally dissimilar with that of assessee who provides off shore software development services to its parent company (Associated Enterprise – AE) and also execute project to support engineering system or to develop software for internal use or for development of new product for AE Comparable selection - filter applied by the DRP in respect of the Related Party Transaction (‘RPT’) at 0% - Held that:- RPT filter of 15% is proper in the case of the assessee. Consequently, the impugned order of the CIT (Appeals) whereby applied filter of 0% RPT is set aside. Hence we direct the Assessing Officer/TPO to apply the RPT filter of 15% and then select the comparables. Benefit of working capital adjustment - TPO has worked out the working capital as per Annexure C to the order passed under Section 92CA however the TPO has restricted the working capital adjustment and not granted the actual computation in the case of each comparable - Held that:- As following the order of the co-ordinate bench of this Tribunal in the case of Bearing Point Business Consulting Pvt. Ltd. (2014 (4) TMI 997 - ITAT BANGALORE), we direct the A.O/TPO to reconsider the issue and allow the appropriate actual working capital adjustment as per the working in case of each comparable. Benefit of proviso to Section 92C of the Act - Held that:- If the comparable price is within the range of + or – 5% of the assessee's price then the benefit of proviso to section 92C shall be granted to the assessee. Accordingly, we direct the A.O/TPO to consider the same at the time of passing the order to give effect this order of the Tribunal.
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