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Principal Commissioner of Income Tax-6 Versus Makemy Trip India Pvt. Ltd.

2017 (11) TMI 587 - DELHI HIGH COURT

Applicability of Transaction Net Margin Method (TNMM) - selection of MAM - Held that:- The Court is of the opinion that no substantial question of law arises. The difference of opinion between the CIT(A) and the TPO, as to the appropriateness of one or the other methods, cannot per se be a ground for interference; the appropriateness of the method unless shown to be contrary to the Rules specially Rules 10B and 10C, in the opinion of the Court, are hardly issues that ought to be gone into under .....

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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, filed by the assessee, was examined by the TPO, who felt that the adoption of the Resale Price Method (RPM) was appropriate in the circumstances. This finding and the consequen .....

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has returned its findings after taking into account the OECD commentary and also analysing the Transfer Pricing Report, filed by the assessee. The extract of the ITAT s order, in this regard, is as follows:- 15.5 Furthermore, the TPO did not draw any adverse inference from the economic analysis transaction of Customer Handling and data Management Services undertaken by the assesse. The same was not contested by the TPO while the same formed part of the economic analysis conducted by the assessee .....

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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 u .....

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ses amounting to ₹ 104.87 mn) is required to be allocated to the assessee. For better appreciation of the working, same is extracted herein below: Incremental Costs attributable to MMT India Amt (INR mn) Total operating expenses of MMT U.S. (not included in Direct costs) - Site hosting 2.63 - Customer handling and processing charges 48.60 - Depreciation 0.50 - Personnel expenses 2.25 - Operating and admin expenses 50.90 104.87 Percentage of US Gross profit attributed by the TPO to MMT Indi .....

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377;1.11 ₹0.29 ₹0.82 MMT India total gross profit on sub-agent business ₹18.69 ₹4.47 ₹14.22 US costs attributed to India Net operating losses attributable to the appellant ₹16.67 ₹(2.45) On perusal of the above computation, the adjustment computed by the TPO has the effect of downward adjustment to the book value of international transactions of the assessee. In this regard, we find that we have already rejected the approach adopted by the TPO, the claim .....

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