Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2019 (11) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (11) TMI 1075 - AT - Income TaxTP Adjustment - international transaction involving provision of support/broker services to the overseas Associated Enterprise (AE) - applying TNMM as the most appropriate method - HELD THAT:- Neither the assessee has provided same or similar service to third parties, nor the AE has entered into same or similar transaction with independent service provider and further, there is no publicly available information on price charged in independent transactions of similar or identical nature that are comparable to the transaction between the assessee and the AE. However, in the very same transfer pricing study report, the assessee did provide an alternative benchmarking under CUP method by applying the price at which the assessee has chartered ships from third parties as internal CUP to benchmark the price charged by the assessee to the AE for voyage charter of the very same vessels to the AE. A perusal of the impugned order of the Transfer Pricing Officer makes it clear that only because the assessee had treated TNMM as the most appropriate method over CUP, he has rejected CUP as the most appropriate method. No further reasoning has been provided by the Transfer Pricing Officer to strengthen his case that CUP cannot be applied as the most appropriate method. We hold that CUP is the most appropriate method in the present case to benchmark the transaction with the AE. relating to the provision of support/broker service. The internal CUP applied by the assessee being a valid CUP, no further adjustment can be made to the price charged to AE. The addition made should be deleted. Selection of comparable - From the website extracts of the company as submitted before us, it is noticed that the company provides services relating to DGFT, customs / excise duty and service tax. It also appears from the facts on record that the company is engaged in the business of trading in digital certificate. Considering the aforesaid factor, the Co–ordinate Bench in Li & Fung (I) Pvt. Ltd. (supra) has held that the company is not a comparable to a business support service provider. It is also relevant to observe, while excluding this company the Bench also took note of the fact that the finanacial statements of the company were not available in the public domain when the company was selected as a comparable. Before us also, AR has specifically submitted that the financial statements of the company were not provided to the assessee. In case of Li & Fung (I) Pvt. Ltd. [2018 (5) TMI 1009 - ITAT DELHI] the Bench also observed that even under TNMM, the requirement for selection of comparable transaction cannot be diluted. Axis Integrated Systems Ltd. cannot be treated as a comparable to the assessee, hence, should be excluded from the list of comparables. In the course of hearing, it was submitted by the learned Authorised Representative that on exclusion of this comparable, the margin shown by the assessee would be within the tolerance range of the average margin of the rest of the comparables, requiring no further adjustment. Thus, he had submitted that there is no need to consider the acceptability or otherwise of the other two comparables. We do not intend to venture into the comparability issues of Cyber Media and Adecco India Pvt. Ltd. for the present and leave it upon for adjudication if the issue arises in any other assessment year in future. Thus, looked at from any angle, the addition made on account of transfer pricing adjustment is unsustainable. Accordingly, it is deleted.
|