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2018 (4) TMI 1635 - AT - Income TaxTPA - MAM selection - assessee had applied TNMM method while taking foreign entity as tested party and had compared the margins of assessee with mean margins of selected comparables - international transaction - determination of arm's length price of transactions pertaining to payment of fees for advisory and other services by the assessee to its associated enterprises - Held that:- As decided in assessee's own case [2017 (12) TMI 1568 - ITAT PUNE] Tribunal held that TNMM method was the most appropriate method to be applied to benchmark international transactions undertaken by the assessee by taking foreign associated enterprises as tested party and further, the Tribunal held that the said transaction of fees paid for advisory and other services was to be benchmarked by comparing the margins of tested party i.e. foreign associated enterprises with margins of external comparables selected by the assessee, who were also engaged in providing similar advisory and related services to its entities. However, for the limited purpose of verification that the margins shown by tested party i.e. foreign associated enterprise was at arm's length price of margins shown by comparables selected by the assessee, the matter was remitted back to the file of Assessing Officer / TPO for verification. The issue which arose in earlier year and since the international transactions undertaken by the assessee were identical to the international transactions undertaken in earlier years, hence following the same parity of reasoning, we hold that TNMM method was the most appropriate method to be applied to benchmark arm's length price of international transactions of fees paid for advisory and other services by taking foreign associated enterprise as tested party. AO is directed to benchmark the transactions by taking margins of foreign comparables which were selected by the assessee in earlier year and even in the year under consideration. However, to verify the claim of assessee that the margins shown by assessee and the mean margins shown by the comparables were within +/- 5% range, the Assessing Officer is directed to comply with the directions of Tribunal as in earlier year and compute arm's length price of international transactions. Adjustment made on account of international transactions pertaining to payment of fees for advisory and other services by the assessee to its associated enterprises - upward adjustment was made in the hands of assessee - Held that:- Referring to ITES segment of assessee companies functionally dissimilar with that of assessee need to be deselected from final list. Also in case the employee cost to sales ratio was less than 25%, then the concerns have to be excluded from final set of comparables.
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