2017 (5) TMI 70 - AT - Income Tax

TPA - ALP determination - TNMM - It was the contention of assessee that Comparable Un-controlled Price CUP method should be adopted for Medical Transcription Services, whereas assessee has no objection for TNMM on ITES - Held that - similar issue was considered by the Co-ordinate Bench in earlier year i.e., AY. 2011- 12 in the case of iMedX Information Services Private Limited Versus The Income Tax Officer, Ward-2 (3) , Hyderabad and Vice-Versa 2017 (3) TMI 478 - ITAT HYDERABAD , where it was held that TPO should have adopted CUP method only for analysing the assessee s International transactions and AO/TPO was directed to adopt CUP method for the medical transcription services and TNMM for the software development services- Since the Co-ordinate Bench has already come to a conclusion on the issue agitated by assessee, respectfully following the same, we direct the AO/TPO to re-do the exercise afresh giving due opportunity to assessee and determine the ALP accordingly, as directed in AY. 2011-12 - appeal allowed by way of remand.

Summary

Issues:
1. Determination of Transfer Pricing adjustments under section 143(3) r.w.s. 92CA(3) of the Income Tax Act.
2. Adoption of Comparable Uncontrolled Price (CUP) method for Medical Transcription Services.
3. Adoption of Transactional Net Margin Method (TNMM) for ITES.
4. Consideration of earlier year's decision by the Co-ordinate Bench.
5. Request for re-examination of the issue by the Revenue/CIT-DR.
6. Review of the order for AY. 2011-12.
7. Direction to AO/TPO to re-do the exercise and determine the Arm's Length Price (ALP) accordingly.

Analysis:
1. The appeal was filed against the AO's order determining Transfer Pricing adjustments. The assessee contested the rejection of the Comparable Uncontrolled Price (CUP) method for Medical Transcription Services and the adoption of the Transactional Net Margin Method (TNMM) for ITES.

2. The Co-ordinate Bench had previously considered a similar issue in an earlier year and directed the AO/TPO to re-do the exercise. The Revenue/CIT-DR requested a re-examination of the issue based on a perceived difference in facts from a previous case.

3. The Tribunal found no factual difference between the current year and the earlier year's decision. It held that the review of the earlier year's order was not within its purview. The Tribunal directed the AO/TPO to re-do the exercise based on the Co-ordinate Bench's previous decision.

4. The Co-ordinate Bench had previously upheld the adoption of the CUP method for analyzing international transactions in a similar case. Accordingly, the Tribunal directed the AO/TPO to adopt the CUP method for Medical Transcription Services and TNMM for software development services, re-doing the exercise and determining the ALP accordingly.

5. The Tribunal concluded that the AO/TPO should follow the directions given in the earlier year's order and consider the orders in other cases for the same assessment year while conducting the study. The appeal of the assessee was considered allowed for statistical purposes.

6. The Tribunal pronounced the order on 28th April 2017, directing the AO/TPO to re-do the exercise and determine the Arm's Length Price accordingly, following the Co-ordinate Bench's decision from the earlier year.