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2015 (12) TMI 1838 - AT - Income TaxTP Adjustment - selection of MAM - appropriate method of accounting - whether the Profit Split Method (PSM) is the most “appropriate method’ when data is not available on the CUP method as most appropriate method - HELD THAT:- We find there are decisions to denounce for PSM and the choice is between the CUP and TNMM as the best appropriate method in matters of indenting international transactions. One of the decisions cited above also supports the CUP as the most appropriate method. We are of the opinion, in principle, we agree with the Ld Counsel’s argument that internal CUP is the most appropriate method in this kind of factual situation. Percentage of commission in ALP studies - correctness of 5% as the Arm’s Length Price (ALP) in benchmarking the transactions with Associated Enterprise (AE) - HELD THAT:- Rate of 1.35% ( in the case of Cisco Systems [2011 (9) TMI 477 - ITAT, BANGALORE] and 1.49% [in the case of Hoganas India Private Limited vs. DCIT [2013 (9) TMI 369 - ITAT PUNE] have to be rejected considering the rates approved in the case of Sumitomo Corporation (2.26%) [2013 (12) TMI 594 - ITAT DELHI] and Bayer Material Science (5%) [2011 (12) TMI 393 - ITAT MUMBAI]. In our opinion, to remove the statistical error, if any, the average of these two comparables should be considered to arrive at the appropriate rate of ALP for benchmarking the impugned transactions. Accordingly, 3.63% should be appropriate rate to be adopted by the AO for calculating the adjustments to be made. Thus, we partly allow the relevant grounds of the assessee as the case may be. Accordingly, AO is directed to adopt 3.63% as appropriate rate of ALP for benchmarking the impugned transactions. Addition u/s 40(a)(ia) - effecting TDS on the payments made, which are actually the case of reimbursement of expenses - HELD THAT:- Such expenditure by way of reimbursement of salaries to Genius company do not attract TDS provisions and therefore, the provisions of section 40(a)(ia) need not be invoked. It is nobody’s case that the payments in question are not in the reimbursement of the salary of the deputed personnel by the Genius. Considering the same, we delete addition on this account and allow the Ground no.2 raised by the assessee. Addition @ 10% of the cost of consumables and expenses for want of bills - AO made addition out of operating and other expenses on ad-hoc basis - Revenue relied on the order of the AO / DRP and submitted that the onus is on the assessee to demonstrate the genuineness of the expenses when a claim is made u/s 37 - HELD THAT:- We are of the opinion that the decision of the DRP and the AO on this issue is fair and reasonable and the same does not call for any interference. Accordingly, these two grounds are dismissed.
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