TMI Blog2017 (11) TMI 587X X X X Extracts X X X X X X X X Extracts X X X X ..... SANJEEV SACHDEVA JJ. Advocates who appeared in this case: For the Appellant: Mr. Rahul Chaudhary with Mr. Sanjay Kumar, Advocates. For the Respondent: Mr. Mayank Nagi, Advocate. S. RAVINDRA BHAT, J. (OPEN COURT) 1. The question of law urged is whether the Tribunal in affirming the Appellate Commissioner s Ruling with respect to the applicability of Transaction Net Margin Method (TNMM) was, in the circumstances of the case, erroneous. 2. The assessee is in the travel and tourism business. It provides on-line solutions for travel product and other comprehensive services for the global traveller including air tickets, hotel reservations, car bookings and holidays. 3. For AY 2005-2006, the Transfer Pricing Report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hodology used to benchmark the other two transactions is without any merit. 15.6 We also find that the TPO failed to appreciate the nature of functions performed and the risk assumed by the assessee in relation to the international transactions carried out by the asssessee with its AEs. Since the assessee performed routine back office services (viz. Customer handling and data management services) for its AEs without being assigned or carrying out any key entrepreneurial function in relation to the offshore business of the AEs, the assessee can be characterized as a routine back office service provider. Hence, the approach adopted by the assessee to benchmark such transactions using TNMM as the most appropriate method by finding compara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T India 15.90% Amount of US operating expenses attributable to MMT India 16.67 As a result, of the above computation of the operating expenses, a downward revision amounting to ₹ 2.45 mn is required to be undertaken to the intercompany transfer prices as shown below: Particulars TPO s Approach Assessee s Approach Additional GP attributed to MMT India Gross Profit Ticketing (sub-agent) ₹17.58 ₹4.18 ₹13.40 Ticketin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preciate that AE of the assessee is not the customer of the assessee, and it is assessee who is the acting as subagent of the AE and in respect of such transactions, assessee has also been remunerated. Since the direct customer segment and subagent segment are materially different as such, the margin of profit earned by the assessee in respect of transactions entered with its AE is not comparable with the margin of profit earned by the assessee with its direct customers. Further, if the approach of the TPO is to be applied then the effect of the comparison would be that assessee will receive 15.90 percent of the total gross profit earned by the AE, and in such circumstances proper adjustment would be to allocate the proportionate operating ..... X X X X Extracts X X X X X X X X Extracts X X X X
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