2023 (9) TMI 606 - AT - Income Tax

TP Adjustment - Selection of MAM - CUP method followed by the assessee was rejected by the TPO and instead TNMM was selected as Most Appropriate Method - HELD THAT - We find that the DRP has already allowed the CUP as MAM in the A.Y. 2011-12, A.Y. 2013-14 and A.Y. 2014-15 and the TPO sought to undertake the comparison invoice by invoice with the third party located in the same geographical location while rejecting the CUP undertaken by the assessee however, these facts are of no relevance as long as the amount/rate charges for hours incurred by an individual for a project is uniform and the services were provided to its AE as well as to third party by same employee located in India. Reliance is being placed on the judgment of Hon ble Supreme Court in the case of CIT, Delhi-II Vs. Cargill Foods India Ltd. 2016 (11) TMI 1567 - SUPREME COURT - Since, the appeal of the assessee is decided in favour of the assessee, the Stay Application of the assessee is infructuous and hence dismissed.

Issues Involved:
The appeal and Stay Application against the order passed by the AO u/s 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961.

Grounds of Appeal:
1. The AO erred in passing the order without appreciating the correct factual position and legal principles.
2. The DRP erred in not passing a speaking order regarding adjustment in consultancy services.
3. The TPO erred by not complying with DRP's directions.
4. Upward adjustment of INR 6,91,26,651 confirmed by AO/TPO and DRP.
5. Violation of principles of natural justice by not granting adequate opportunity to be heard.
6. Economic analysis not accepted for determining arm's length price.
7. Arbitrary rejection of selected method and comparables.
8. Filter applied to reject certain comparable companies.
9. Cherry-picking of comparables for benchmarking.
10. Selection of companies with supernormal profits for benchmarking.
11. Incorrect computation of adjustment on total cost instead of cost related to the subject transaction.
12. Disregarding DRP's directions.
13. Levying consequential interest under Section 234B.
14. Initiating penalty proceedings under section 274 read with section 270A.

Comprehensive Details:
The appeal and Stay Application were filed against the order passed by the AO under the Income Tax Act, 1961. The assessee raised multiple grounds of appeal, challenging the actions of the AO, DRP, and TPO regarding the adjustment of INR 6,91,26,651 to the total income. The issues included the rejection of economic analysis, non-acceptance of selected methods, and comparables, as well as errors in computation and compliance with directions.

The DRP's directions were crucial, emphasizing the acceptance or rejection of the ITAT's order in previous years. The TPO's failure to follow DRP's directions was highlighted by the assessee in the appeal before ITAT. The dispute revolved around the method selected for benchmarking and the rejection of certain documents and details by the assessee, leading to upward adjustments and the adoption of TNMM over CUP method.

The arguments presented by the LD DR focused on the assessee's non-submission of essential documents and details, which influenced the TPO's decisions. Discrepancies in the submission of invoices and technical descriptions were noted, leading to the rejection of the CUP method. The comparison of previous years' practices with the current case was debated, emphasizing the need for consistent and thorough documentation to support the chosen methods.

The ITAT's decision favored the assessee, rendering the Stay Application infructuous and directing the revenue to refund the amounts collected. The judgment highlighted the importance of following proper procedures and providing comprehensive documentation to support the chosen methods in transfer pricing cases.

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