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2021 (1) TMI 1130 - AT - Income TaxRectification of mistake u/s 254 - determination of ALP of the international transaction of Management Fees - Tribunal has restored the issue of determination of the Arm’s Length Price (ALP) of the international transaction of payment of Management Fees to the AO/TPO with a direction to select the correct method and then determine its ALP - Tribunal, in its order u/s 254(1), has rejected the selection of the Cost Plus method (CPM), the Transaction Net Marginal method (TNMM) and the Comparable Uncontrolled Price (CUP) method - HELD THAT:- Tribunal observed certain inconsistencies in the application of the methods by the assessee and the TPO, which did not properly fit into the application mechanism. Those were the raison d’etre for discarding their application. For example, the assessee wrongly considered foreign AE as a tested party or did benchmarking under the TNMM in an aggregate manner. The Tribunal did not approve this. Both these fall in the domain of wrong application of method. Similarly, the TPO did not select any comparable uncontrolled transaction under the CUP method, which got disapproved by the Tribunal in its order u/s 254(1) of the Act. This is again an instance of wrong application of method. Overruling the wrong application of the method doesn’t mean ruling out the selection of that Method as well. If the wrong application of a method is corrected, there can be no impediment in its selection. To put it simply, it is still open in the fresh proceedings to choose the assessee as a tested party and benchmark the transaction on segregate basis and apply the TNMM; or to find out a suitable comparable uncontrolled transaction and apply the CUP method; so on and so forth. The long and the short of the whole thing is that selection of any of the methods is open before the TPO, who can reshuffle the existing data or require the assessee to make good the deficiencies in the existing data as observed by the Tribunal in its order u/s 254(1) and proceed with the determination of the ALP of the international transaction. Once the matter has been sent back to the TPO for a fresh determination of the ALP of the international transaction of the payment of Management services, we do not wish to clip his wings by directing to adopt a particular method only. Now it is within his domain to find out the most appropriate method in the facts and circumstances and proceed accordingly.
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