TMI Blog2022 (10) TMI 375X X X X Extracts X X X X X X X X Extracts X X X X ..... OHAN GARG , JUDICIAL MEMBER AND SHRI NARENDRA KUMAR BILLAIYA , ACCOUNTANT MEMBER For the Assessee : Shri Vishal Kalra , Advocate Ms. Sumisha Murgai , C. A. For the Revenue : Shri Bhaskar Goswami , CIT - DR ORDER PER SHRI CHANDRA MOHAN GARG , J. M. This appeal by Assessee has been directed against the order of the Assistant Commissioner of Income Tax, Circle-4(2), New Delhi dated 24.10.2017 giving effect to the directions of the Disputes Resolution Panel-1 [in short DRP ], New Delhi, dated 30.08.2017 relating to A.Y. 2013- 14. 2. Briefly stated facts of the case are that the assessee-company was incorporated on 31.03.2000 and is engaged in the business of IT enabled services. The Company is also operating and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 92CA(3) of the I.T. Act, 1961 by determining the total ALP adjustment of Rs.60,94,597/-. The A.O. after discussing the case with the Learned Authorised Representative of the assessee company added the proposed ALP determined by the TPO of Rs.60,94,597/- to the total income of the assessee company in the draft assessment order dated 15.11.2016. 2.1. Aggrieved by the draft assessment order dated 15.11.2016, the assessee-company filed it s objections before the DRP and the DRP under section 144C(5) of the I.T. Act, 1961 issued directions dated 30.08.2017 to the TPO by reducing the transfer pricing adjustment amounting to Rs.49,33,499/- as against a sum of Rs.60,94,597/- proposed by the TPO. Pursuant to the directions of the D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PO erred in not appreciating that none of the conditions set out in section 92C(3) of the Act are satisfied in the present case. 4. That on facts and in the circumstances of the case and in law, the DRP/AO/TPO erred in rejecting the Internal Transactional Net Margin Method ( TNMM ) applied by the Appellant and thereby applying external TNMM to benchmark the international transactions of the Appellant. 5. That on facts and in the circumstances of the case and in law, the DRP/AO/TPO erred in rejecting the segmental accounts maintained by the Appellant by merely stating that the segments created in the TP report are artificial. 6. That on facts and in the circumstances of the case and in law, the DRP/AO/TPO erred in applicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rounds of appeal Nos.2, 3, 8 and 9. Therefore, grounds of appeal Nos.2, 3, 8 and 9 are dismissed as not pressed. 6. Grounds of appeal No.10 is of consequential in nature, which need not be adjudicated. 7. Grounds of appeal Nos.4 and 5 relating to rejection of internal TNMM applied by the assessee company. 7.1. During the course of hearing, the Learned Counsel for the Assessee, drew the attention of the Bench to Paper Book at page No.792 contending, inter alia, that similar issue has been decided by the Coordinate Bench of Delhi I-I, Bench, Delhi in ITA.No.6577/Del./2016 vide order dated 12.11.2021 wherein the Tribunal allowed the claim of assessee i.e., to adopt internal TNMM for bench marking provisions of ITEs. The Learned Counse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the nature of services rendered by the assessee to non-AEs broadly comprised of customer care and technical support, viz., payroll, recruitment, IT support etc. The business operations of the assessee are divided into various operational processes that it performs for its customers (AE s and non AE s). While processes carried out for the AE and non AE may differ, the fundamental functions performed by the assessee under each of these processes are the same and fall under the category of ITeS Industry. These aspects were never disputed by the TPO/AO at any stage. In fact, the TPO/AO simply stated that the nature of services performed in AE segment are totally different from nature of services in non-AE segment. But how the services are fund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the preference of internal comparables over external comparables. (relied upon Para 3.27 and 2.58 of OECD guidelines). In fact, the United Nations Practical Manual on Transfer Pricing for Developing Countries, released in 2013 (UN manual) also provides that TNMM is less dependent on product comparability because net margins are less influenced by differences in products and functions, as compare to other methods like CUP. Therefore, we direct the TPO/AO to adopt internal TNMM for benchmarking provision of ITeS. Ground Nos. 4 and 5 are allowed. 9.1. We find on identical facts the Coordinate Bench of the Delhi Tribunal passed the above order dated 12.11.2021 (supra) and the grounds raised by the assessee company in the present appeal ar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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