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2017 (6) TMI 129 - AT - Income TaxTPA - according to the CIT(A), whichever way one looks at it- whether on the basis of CUP or TNMM, the transactions entered into by the assessee are at arms length price. The ALP adjustment was thus deleted - Held that:- So far as back to back transactions at the same price are concerned- whether between the AEs or by the AE to the end customer independent enterprise, these are inherently arm’s length transactions on the basis of CUP analysis. The distinction drawn by the TPO on the basis of FAR analysis of the enterprise rather than the transaction, which is sought to be justified before us by the learned Departmental Representative, is a distinction without any difference. It is also incorrect to proceed on the basis, as has been doen by the TPO, that when TNMM in puts are available, the application of CUP can be rejected. CUP is not a residuary method. As a matter of fact, when perfect CUP inputs are available- as in this case in respect of back to back transaction, that is the best and inherently most suitable method, as it is a direct method and it hardly leaves any scope for distortion of results by extraneous factors. We reject the plea of the learned Departmental Representative on this point. So far as transaction of rendering software development services for US $ 1,57,739 to Calance US is concerned, we have noted that there is only one comparable available, and that too, as learned Departmental Representative rightly points out, was at an exceptionally lower rate as the assessee was trying to enter a new market. This solitary transaction, according to the learned Departmental Representative, cannot be said to be representative of the commercial transactions of this nature in the US market. Learned counsel for the assessee was also fair enough in not contesting these facts, particularly with respect to a single comparables of small size and in respect of a new market that the assessee was trying to enter, but he did state that even if this CUP input is ignored, there will not be any need of ALP adjustment because the margin on this transaction, when computed correctly, will be comparable with the arm’s length margin computed by the TPO. However, we have noted that this aspect of the matter has not been dealt with by the CIT(A) in sufficient detail, by way of a speaking order, and all that the CIT(A) has stated that the total costs of software development comes to ₹ 2,40,57,988. We, therefore, consider it appropriate to remit this limited aspect of the matter for the verification by the TPO.
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