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2017 (9) TMI 300 - AT - Income TaxAdjustment u/s 92CA - strictly relying on TNMM OR considered CUP as MAM - providing telecommunication net working services - adjustment on account of capacity under-utilisation of capacity - Held that:- entity level results comprising of international transactions and domestic transactions cannot be considered for the purpose of testing the price of the international transactions with comparable price being ALP. It is also pertinent to note that while selecting the comparable entity for the purpose of determining the ALP of international transactions an appropriate filter of not less than 75% of the revenue from exports is applied. - the appropriate method in our view would be CUP and particularly when the AE of the assessee was receiving the same services from Tata Communications just prior to the incorporation of the assessee. The assessee is using the same network bandwidth hired from Tata Communications and also claimed that during the year under consideration the assessee is in the testing phase and was not able to provide proper services as manifest from the agreement with the client. Thus it is apparent that the services of the assessee were not better than the earlier provided by Tata Communications to the AE of the assessee and therefore, the contention of the ld. AR is devoid of any substance or merit. Further in case CUP is adopted as a MAM the question of non-utilisation of network and corresponding adjustment on account of lease, charges would not arise. Accordingly, in the facts and circumstances of the case, when direct CUP between the AE and Tata Communications from whom the assessee has taken the network on lease is available then the ALP has to be computed under CUP. We further note that it is the stand of the assessee that the assessee as well as the TPO has accepted the TNMM as MAM. However when the assessee has expressed its helplessness to compute the margins separately in respect of the international transactions then the direct CUP available in case of the assessee would be an appropriate method of determination of ALP. Also the assessee claimed to have taken the network on lease from Tata Communications however the agreement filed before us by the assessee is with Tata Teleservices Ltd. (TTL)/Tata Teleservices (Maharashtra) Limited (TTML) and not Tata Communications Limited. Therefore this aspect is required to be verified properly. Hence when the assessee has substituted the Tata Communications Ltd. in providing the services to the AE then the CUP would be the MAM. Accordingly, we set aside the matter to the record of the TPO for determination of the ALP on the basis of CUP. Appeals of assessee are allowed for statistical purpose
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