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2016 (3) TMI 1114 - AT - Income TaxTransfer pricing adjustment - most appropriate method for TP analysis - Held that:- It was fairly admitted that rate per hour is not available for strict comparison. It was also submitted that the assessee has not taken NASCOM rates as the basis in comparing the rate per hour. This indicates that assessee’s comparability under the CUP method is based on various assumptions of (a) estimating the offshore profits, (b) estimating number of employees, (c) estimating the working hours per employee per day per month, and then dividing the profit by so many assumptions/ numbers. This analysis of the assessee cannot be relied on as an external CUP. As can be seen from the above, there is no internal CUP which can be relied on in order to accept the CUP method. Therefore, in our view, the analysis undertaken by the assessee is not only faulty, but devoid of any data or proper analysis. In view of this, we have no option than to accept the TPO’s contention of TNMM as the most appropriate method. 5.8 Under section 92C of the Act, ALP has to be examined adopting the most appropriate method. In view of absence of reliable data either to adopt Cost Plus Method or to analyse the data on the basis of CUP method, either internal CUP or external CUP, we are of the opinion that under given facts and circumstances of the case, TNMM is the only option available to the TPO to analyse the assessee’s transactions in order to arrive at the ALP. Therefore, we reject the assessee’s contentions on CUP/CPM as most appropriate method and approve the approach taken by the TPO for analyzing transactions under TNMM. As the assessee contended that the reimbursement costs are included in the working , the actual working of TPO is not verifiable we restore the issue to the file of TPO to examine the computation again by excluding the reimbursement cost since it do not have any profit margin and also to consider whether the companies fail the RPT filter or not. Assessee should be given due opportunity and its working should be considered after due examination. The grounds relating to this issue are allowed for statistical purposes. Exclusion of foreign exchange fluctuation from the working of operating margins of the company - Held that:- We direct the AO/TPO to consider the foreign exchange gain or loss as part of the operating cost or revenue, as the case may be, for both the assessee as well for the comparable companies Risk adjustment - Held that:- As found that the differential in the margin of the assessee and the comparables is beyond 5% bandwidth recognized in proviso to section 92C(2) of the Act, then adjustment is required to be made to the reported value of the assessee’s transaction with its AE. It is ordered accordingly
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