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2019 (2) TMI 714 - AT - Income TaxTransfer pricing adjustment - most appropriate method to be applied while bench marking international transactions of assessee - MAM selection - TNMM or CUP - availability of compare transaction - Held that:- difference in functions performed, assets employed and risk assumed by the assessee under the activity of sale of manufactured items to the associated enterprise and non associated enterprise. - there were geographical differences in markets, wherein the assessee was exporting components to associated enterprises located in France, whereas the components sold in non associated enterprises were in India. - two transactions undertaken by the assessee were not comparable. Where the assessee was acting as contract manufacturer in respect of export of components to associated enterprises then, CUP method was not correct method to be applied to benchmark international transactions of the assessee. Following the ratio laid in Pr.CIT Vs. M/s. Amphenol Interconnect India P. Ltd. (2018 (3) TMI 536 - BOMBAY HIGH COURT), we hold that TNMM method is to be applied in this regard. The assessee has earned margins of 7.76%. The assessee had also furnished details and had selected certain comparables as functionally comparable whose mean margins worked out to 7.12%. TPO has not considered the said plea of assessee. So, in all fairness, we direct the AO / TPO to apply TNMM method to benchmark the international transactions of assessee and compare the margins shown by assessee with the mean margins of comparables which are functionally comparable. In this regard, the matter is being set aside to the file of AO / TPO for limited purpose to verify the stand of assessee and to determine arm's length price of international transactions. The grounds of appeal raised by assessee are thus, allowed.
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