TMI Blog2015 (2) TMI 202X X X X Extracts X X X X X X X X Extracts X X X X ..... plying CUP method. As ALP determined by TPO and confirmed by DRP is not under CUP method, the same is invalid. Rule 10B(1)(a) of IT Rules prescribes the method for determination of ALP under CUP. As per the said provision, TPO at first has to find out the price charged or paid for property transferred or services provided in a comparable uncontrolled transaction or a number of such transactions and thereafter making necessary adjustments of such price on account of differences between the international transactions and comparable uncontrolled transactions or between the enterprises entering into such transactions which could materially affect the price in the open market, TPO will have to determine ALP. Therefore, unless, comparables are brought on to benchmark the price charged by a particular assessee, it cannot be said that the price charged by assessee is not within the arm’s length. However, on a perusal of the order dated 23/05/2013 of the TPO passed in pursuance to the direction of the Tribunal, it is very much clear, TPO has expressed his inability in finding a comparable under CUP method. In these circumstances, there was no other choice left to TPO but to accept the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of the facts and materials on record, noticed that during the year Wipro had rendered similar services to assessee s AE and had charged hourly rate of USD 22. He also noticed that in the following FYs i.e. FY 2002-03 and 2003-04, assessee has increased the rate per man hour to USD 18 and 29 respectively. Therefore, TPO considering the rate charged by Wipro and also rate adopted by assessee for subsequent years adopted rate of USD 18 after making adjustments under CUP towards the nature of services provided, turnover, number of employees, age of the company, geographical location, quality of manpower used vis- -vis Wipro. As a result, the ALP of the service rendered was determined at USD 21,68,073, which resulted in determination of ALP of ₹ 10,40,67,504 as against ₹ 5,75,68,918 shown by assessee. The resultant shortfall was, therefore, treated as adjustment u/s 92CA(3) of the Act. In terms with the order passed by TPO, AO made addition of ₹ 4,64,98,586 while completing assessment u/s 143(3) of the Act. Being aggrieved of the assessment so made, assessee preferred appeal before ld. CIT(A). Though, ld. CIT(A) upheld the rate per man hour of USD 18 adopted b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rived at the discounted rate, there is no question of further giving any deduction towards any adjustments at 5%. Accordingly, we direct the Assessing Officer to follow the CUP method as adopted by the assessee itself in this assessment year. However, he has to re-determine the TPO as per the above directions. 5. In pursuance to the directions of the Tribunal, the TPO took up the proceedings again for determination of ALP of the international transaction. In course of the proceeding, assessee submitted a quotation obtained from M/s Inspira Technologies P. Ltd., 144, 2nd Floor, Akash Ganga, Srinigar Colony, Hyderabad as a CUP. TPO observed that as per the said quotation the company had offered a rate of USD 10 per man hour initially and from the beginning of 7th month to USD 12 per man hour. TPO, however, did not accept the submissions of assessee by observing that as per rule 10B(1)(a) under the CUP actual happening of an event is considered. In other words, the comparable transaction is identified where a price has been actually charged or paid and suitable adjustment if required are to be made to arrive at the ALP. However, in a case where the price is chargeable or payabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TAT and, therefore, there is no infirmity in the order of the TPO. Accordingly, we decline to interfere with the order of the TPO and the ground of objection is rejected. As a result of the order passed by the DRP rejecting assessee s objection, AO passed the impugned order confirming the addition of ₹ 4,25,09,332. 7. Being aggrieved of the orders of AO and DRP, assessee has preferred the present appeal raising the following grounds in the Memorandum of Appeal: 1. In the facts and circumstances of the case, the order u/s 143(3) r.w.s 144C dt. 23/06/14 by the ITO is unjustified, incorrect and not as per law. 2. The AO/DRP is not justified in not perusing the valid third party quotation obtained by AE and filed by the appellant, without taking the same on record and examining the same in detail. 3. The AO/DRP ought to have appreciated the fact that ALP is defined exhaustively u/s 92F (ii) as a price which is applied or proposed to be applied in a transaction between persons other than associated enterprises, in uncontrolled conditions and hence ought to have considered the third party quotation obtained by AE and filed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct in determining the ALP in compliance to the direction of the Tribunal. 11. We have considered the submissions of the parties and perused the orders of revenue authorities as well as other materials on record. This is second journey of assessee to the Tribunal. On the earlier occasion while disposing off the appeals of assessee as well as the department, the Tribunal has given a clear direction to TPO to determine the ALP under the CUP method by bringing comparable cases on record. Of course it directed the TPO, as a second option, to adopt the rate charged by assessee in the subsequent FY in case no comparable case is available under the CUP. However, the Tribunal while considering the Miscellaneous Application of assessee registered as M.A. No. 136/Hyd/2014 in order dated 09/01/2015 modified the appeal order by deleting direction given to TPO to consider the rate adopted by assessee in the immediate next year. Thus, after the order dated 09/01/2015 passed in M.A., the only option left to AO/TPO for determining ALP is by applying CUP method. As ALP determined by TPO and confirmed by DRP is not under CUP method, the same is invalid. Rule 10B(1)(a) of IT Rules prescribes the me ..... X X X X Extracts X X X X X X X X Extracts X X X X
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