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2023 (1) TMI 469 - AT - Income TaxTP Adjustment - Rejection of Associated Enterprises as the tested party - CIT (A) has categorically held that the foreign Associated Enterprises is the least complex entity and therefore there is no reason that same cannot be taken as a tested party - HELD THAT:- OECD guideline states that choice of the tested party should be constant with the functional analysis of the transaction. Generally, the tested party is the one to which a transfer pricing method can be applied in the most reliable manner and for which the most reliable comparable can be found and further it would be most often the party that is the less complex functional analysis. UN transfer pricing guidelines are also on the similar lines. Further, the Indian Jurisprudence is also on the similar principles. Therefore, the principle emerges that it is better if a tested party is taken whose functions are less complex in nature, does not own any intangible generally and the results which can be verified by using reliable data base. In the present case, the foreign Associated Enterprises is admittedly least complex functions and does not know any intangible and further the assessee has used the Standard and Poor’s CompStat and Merchant Database. The comparability analysis shows that the total population of 285 companies was available with respect to market sales support and customer relationship services and 940 companies were available in provision of revenue cycle management services by using one source global business process database. Thus, foreign Associated Enterprises satisfied all the criteria for being taken as a tested party. TPO merely rejected the same as Associated Enterprises is located in different geographical locations. It a proper justification by the learned Transfer Pricing Officer to reject the foreign Associated Enterprises as a tested party. CIT (A) order is affirmed. With respect to comparability analysis, the directions are given by the learned CIT (A) in Para no. 11 which are subject to verification by the learned TPO. We do not find any infirmity in these directions. Accordingly, grounds of the appeal of AO are dismissed. Appeal filed by the AO is dismissed.
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