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2019 (11) TMI 635 - AT - Income TaxTP Adjustment - comparable selection - Functionally similarity - HELD THAT:- Assessee a wholly owned Indian subsidiary of FIL Capital Management (Mauritius) Ltd. (FIL, Mauritius), engaged in providing non–binding investment advisory services to its overseas Associate Enterprises (A.E). The assessee also provides non-binding investment advisory services to its A.E., therefore, it is a risk mitigated entity. For the assessment year under consideration, the assessee entered into international transaction of non–binding investment advisory services with its A.E. and earned revenue of ₹ 26.58 crore The assessee while filing return of income for the year under consideration reported international transaction with its AE. The assessee also furnished its transfer pricing report as required under the Income –tax Act. For bench marking the transaction, the assessee undertook a study by adopting Transaction Net Margin Method (TNMM) as most appropriate method with OP/OC as the Profit level indicator ( PLI). By considering itself as the tested party, the assessee undertook a search process in the data bases and identified following four comparables with average arithmetic mean of 8.82% on the basis of three year data. AO referred the matter to the TPO for determination of ALP of International Transaction. For benchmarking the International Transaction, the assessee adopted TNM as most appropriate method, operating profit/operating cost was considered as profit level indicator and assessee company has taken tested party. Thus companies functionally dissimilar with that of assessee to be deselected from final list.
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