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2021 (2) TMI 357 - AT - Income TaxTP Adjustment - re-computing the Arm’s Length price (ALP) of Salary payments made to related parties - comparable cases selected by the TPO for the purposes of determining the arm’s length price of the transactions entered into by the assessee company in terms of payment of remuneration to the related persons while applying the CUP method - HELD THAT:- Both the related persons as well as comparable cases selected by the TPO are holding non-teaching faculty role, and are holding and discharging administrative functions in terms of supervising and managerial role in their respective administrative fields - besides the requisite educational qualification which each of them possesses, what is more relevant is the experience and period of service of such personnel discharging their respective functions which would provide a better and rationale basis for benchmarking analysis. In the instant case, we find that each of the related persons have rendered services of three years as on 1.04.2014 and thus carry the desired experience and skill set developed over such period of three years with the assessee company of supervising and managerial activities in their respective administrative fields whereas in cases of comparable cases selected by the TPO, we find that in these cases, the employees have rendered service ranging from seven months to five years which provide a wide variance and thus, for comparability purposes, it would be appropriate to consider comparable cases who have rendered services for minimum three years and exclude other cases who have rendered services for a lesser period. Case of Shri Prashant Varma who has rendered service of 4 years and that of Shri Yashwant Sharma who has rendered service of 5 years would be taken as comparable cases and rest all cases shall be excluded for the purposes of comparability analysis. The average salary of these two comparable cases comes to ₹ 618,500/- which shall be taken as ALP of salary paid to related persons as against current salary of ₹ 696,600/- resulting in transfer pricing adjustment of ₹ 546,700/- in hands of the assessee company. The AO/TPO is accordingly directed to restrict the TP adjustment to ₹ 546,700/- and the ground of appeal is thus partly allowed.
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