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2018 (1) TMI 1411 - AT - Income TaxTPA - determination of ALP of international transaction - MAM selection - CPM OR TNMM - retrospective amendment to the second proviso to section 92C (2) by the Finance Act, 2012 - Held that:- As decided in assessee's own case [2014 (3) TMI 619 - ITAT DELHI] directing TPO to exclude domestic transaction in computation while computing adjustment based on ALP of international transaction was upheld”. So, we are of the considered view that for transfer pricing adjustment only, international transactions are to be considered. Since there is no change of facts on this point qua the year under assessment, TPO is directed to exclude domestic transaction in computing adjustment based on ALP of international transaction. TPO while computing the ALP of international transaction has taken average OP/TC at Profit Level Indicator (PLI) at 14.24% which is factually incorrect because as per working of comparable companies net margin given by the taxpayer, available at page 194 of the paper book, is 11.51%. Without disputing the working of the comparable companies and net margin given by the taxpayer, the ld. TPO has wrongly given the average at 14.24% which is incorrect. So, TPO is directed to adopt the correct average PLI as per working available at page 194 of the paper book. TPO was required to consider the segmental account to determine the ALP of the international transaction. Taxpayer is directed to again place on record segmental accounts with identifiable cost in profit and loss account of the taxpayer to be examined by the ld. TPO. Denying the benefit of +/- 5% by applying the TNMM under Second Proviso to section 92C (2) Tolerance margin in the instance case is to be determined after making correct computation by the TPO, as discussed in the preceding paras. We are of the considered view that in case, variation between the ALP as determined u/s 92C (1) and the price at which the international transaction has actually been undertaken exceeds the tolerance margin then the taxpayer is not entitled for benefit of +/- 5%. This exercise is to be carried out by the TPO after correct computation by the TPO in the light of the decision rendered by the Special Bench of the Tribunal in IHG IT Services (India) (P.) Ltd.[2013 (5) TMI 309 - ITAT DELHI]. In view of what has been discussed above, impugned order passed by the ld. DRP/TPO/AO is set aside and the TPO is directed to decide afresh after providing an opportunity of being heard to the taxpayer in view the directions issued herein before. Appeal filed by the assessee is allowed for statistical purposes - Appeal filed by the assessee is allowed for statistical purposes
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