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2017 (4) TMI 1487 - AT - Income TaxTP Adjustment - international transaction - pass through income - selection of MAM - comparable selection - HELD THAT:- As argued that the assessee only exports software development services to AEs as well as non-AEs in USA and domestic clients. Thus KMG USA does extensive marketing and secure contracts with third parties and outsources the same to KMG India on Back to Back basis. The assessee-company serves as an execution centre for contracts won by KMG USA. KMG USA does not retain any margins from the amount billed to end customers. For the services performed by AE, assessee-company pays commission at 10% for offshare services and 25% on onsite revenue services. Thus, revenue earned by the assessee-company from its AE is only pass through income and they are not an international transaction. It is the contention of the assessee that TPO had not considered the submissions of the assessee-company. DRP rejected the assessee-company’s contentions without assigning reasons whatsoever. The assessee also contends that the TPO as well as DRP had not assigned any reason as to why CUP method is not most appropriate method in the nature of transactions assesseecompany had with its AE. It was also submitted that TPO has not considered the alternative submissions of the assesseecompany that in case TNMM is adopted as the most appropriate method, same should be applied based on internal comparables rather than external comparables. Now, law is quite settled that internal comparables are more preferable to external comparables. Finally, learned authorised representative of the assessee submitted that the TPO had not considered the submissions of the assessee-company for adjustment towards unutilized capacity. The AO also not followed directions of the DRP while passing final assessment order. In the circumstances, it was prayed that the matter may be restored back to the file of the AO for de novo consideration. CIT(DR) had no serious objections for restoring the matter back to the file of the AO/TPO for fresh analysis of TP study. In the circumstances, we remit the matter back to the AO to consider the above submissions de novo after affording due opportunity of being heard to the assessee-company.
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