TMI Blog2016 (4) TMI 157X X X X Extracts X X X X X X X X Extracts X X X X ..... the TPO / DRP is bothered to furnish the same. In fact, as seen from para 7.3 of the DRP order, the onus is kept on the assessee by mentioning that the assessee agreed for substituting the TNMM method as an appropriate method, which is not proper. Considering the above deficiencies, inaccuracies and incompleteness, we are of the opinion the matter should be set aside to the file of the TPO / AO for fresh adjudication. AO / TPO shall grant a reasonable opportunity of being heard to the assessee as per the set principles of natural justice. - I.T.A. No.6842/M/2012 - - - Dated:- 24-2-2016 - SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER For The Appellant : Shri M.P. Lohia Mr. Hemen Chandariya For The Respondent : Shri Mahesh Sheth, CIT-DR and Shri N.K. Chand, CIT-DR ORDER PER D. KARUNAKARA RAO, AM: This appeal filed by the assessee on 8.11.2012 is against the order of the AP / TPO / DRP for the A for the AY 2008-2009. 2. In this appeal, assessee raised 16 grounds in toto. At the outset, Shri M.P. Lohia, Ld Counsel for the assessee brought our attention to the grounds raised in this appeal and submitted that Ground nos. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y for adjudicating the issues are that the assessee is primarily engaged in the business of distribution of software and consultancy. Assessee entered into international transactions with the AEs involving both the receipts and expenditure. The same are extracted as under:- S.No. Nature of International transaction Value (Rs.) Method 1. Purchase of manuals 6,04,672/- CUP 2. Royalty paid @ 50% of license 16,57,93,146/- CUP 3. Software licensing expense under 37,06,293/- TNMM 4. Software License Revenue received from global contract 7,18,50,060/- TNMM 5. International expenses fees received 1,16,25,556/- CPM 5. Assessee provided segmental results involving (i) consultancy and training; (ii) software licensing revenue segment. There is no dispute so far as the seg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the proceedings before the DRP, assessee raised the issues shortlisted above. Regarding the method of accounting, DRP gave a finding that the assessee has agreed in favour of the TNMM method in place of CUP method adopted by the assessee. Contents of para 7.3 of the DRP‟s order are relevant in this regard and the same read as under: 7.3. As already noted, both the assessee and the TPO / Assessing Officer agreed that the Arm‟s Length Price in respect of the Software Distribution and licensing segment is to be computed through TNMM. 9. Eventually, DRP issued guidelines u/s 144C(5) of the Act confirming the adjustments made by the TPO / AO vide order dated 22.8.2012. Aggrieved with the above order of the AO / TPO / DRP, assessee filed the appeal before the Tribunal with the above extracted grounds. 10. During the proceedings before us, Shri M.P. Lohia, Ld Counsel for the assessee brought our attention to the above international transactions and submitted that the international transactions at Sl. No.1 being purchase of manuals , the value is very small and the same is not very significant. However, referring to the international transaction at Sl. No. 2, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the above judgment of the Hon‟ble jurisdictional High Court in the case of Thyssen Krupp Industries India Pvt Ltd (supra). Further, Ld Counsel for the assessee submitted that the rejection of the assessee‟s CUP method and RPM method without giving reasons by the TPO / AP is improper and not in the interest of the justice. Explaining the logic, Ld Counsel for the assessee argued that rejection of the assessee‟s comparables on the basis of absence of contemporaneous data without giving reasons is also unsustainable. He argued vehemently stating that the comparables such as (i) Alphageo (India) Ltd; (ii) Mahindra Consulting Engineers Ltd; (iii) N T P C Electric Supply Co. Ltd, which were eventually considered for benchmarking the transactions with AE is again appropriate as these comparables are eventually difference qua the royalty payment to the AEs and others. Ld Counsel for the assessee argued stating that the finding of the DRP given in para 7.3 extracted above prima facie is wrong. He also mentioned that the TPO erroneously held that the assessee applied TNMM method to all the transactions, which is prima facie wrong. In this regard, Ld Counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame. In fact, as seen from para 7.3 of the DRP order, the onus is kept on the assessee by mentioning that the assessee agreed for substituting the TNMM method as an appropriate method, which is not proper. Considering the above deficiencies, inaccuracies and incompleteness, we are of the opinion the matter should be set aside to the file of the TPO / AO for fresh adjudication of the above referred Ground Nos. 8, 9 and 10. AO / TPO shall grant a reasonable opportunity of being heard to the assessee as per the set principles of natural justice. In the set aside proceedings, AO / TPO is directed not to resort repeating of the same additions without passing a speaking order on the following issues which are connected to the grounds raised above. 1. Whether the CUP method, used by the assessee, is most appropriate one in respect of the assessee‟s international transactions? If not, reasons for rejecting the same. 2. Whether the TNMM method, which is considered by the TPO, is the most appropriate method for benchmarking the software licensing revenue segment? If yes, reasons for considering the same? 3. Whether the transfer pricing adjustment should be made only ..... X X X X Extracts X X X X X X X X Extracts X X X X
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