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2019 (5) TMI 1832 - AT - Income TaxTP Adjustment - upward transfer pricing adjustment on the services rendered to its AE - assessee benchmarked its international transaction with AE by applying internal CUP method - assessee alternatively in its TP study report has also benchmarked the transactions by taking internal TNMM method where operating profit to operating cost was taken as PLI - TPO was of the view that the internal comparable selected by the assessee is not appropriate and reasonable accurate adjustment also cannot be made in the available facts and circumstances - TPO rejected the internal CUP and internal TNMM as most appropriate method - HELD THAT:- As relying on assessee's own case [2018 (1) TMI 1613 - ITAT AHMEDABAD] assessee rightly benchmarked the transaction by choosing the internal CUP method as most appropriate method and alternatively also rightly benchmarked the internal TNMM method as most appropriate method to determine the ALP. Accordingly, the appeal of the assessee is allowed. Alternate ground of appeal raised by the assessee for taking the external TNMM - TPO rejected the internal CUP and internal TNMM method selected by the assessee - TPO selected 8 companies as comparables - HELD THAT:- Cross Domain Solution Pvt Ltd is engaged in KPO services. Therefore the same is not a fit comparable in the given facts & circumstances. Hence we direct the TPO to exclude this company as comparable. R systems International Ltd - Comparable has been identified after the documentation of TP study, therefore, the exercise is post facto analysis - assessee before TPO also submitted that the AMP expenditure also includes some expenses such as marketing salary, marketing travel, commission on sales and advertising & sales promotion which are not in AMP nature. However ld. TPO failed to give any findings on it. The ld. DR also did not argue in this regard before us, therefore, we are assuming it to be in the nature of selling expenses and not in the nature of AMP expenses. Accordingly, we are of the opinion this comparable should be taken in to account while benchmarking the transaction. CG-Vak Software and exports Ltd - Its turnover is less than ₹ 1 Crores and its margin had been fluctuating during the past and subsequent years - As decided in own case [2018 (1) TMI 1613 - ITAT AHMEDABAD] the turnover of the relevant segment of the company is 86.10 lacs but just because this company does not pass the turnover filter of 1 crore should not have been rejected as the business is exactly similar to that of the appellant company.” Respectfully following the same we also direct the TPO to consider this companies as discussed above as comparable. Hence the ground of appeal of the assessee is allowed.
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