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TMI Blog2017 (3) TMI 478X X X X Extracts X X X X X X X X Extracts X X X X ..... Accordingly, we uphold assessee’s objections with reference to the adoption of method and direct the AO/TPO to adopt CUP method for the medical transcription services and TNMM for the software development services. AO/TPO is directed to re-do the exercise afresh giving due opportunity to assessee and determine the ALP accordingly. Exclusion of certain companies selected in ITES segment - Held that:- Since we have not accepted the method adopted by the TPO and directed the AO/TPO to re-do the entire exercise afresh, appeal of Revenue becomes infructuous. Revenue, however, is free to raise any issue in case it is aggrieved on the TPO/DRP’s orders in the consequential proceedings. With these observations, Revenue’s appeal is considered inf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he average rate charged by them has been arrived at 0.046 USD/line as against its working of 0.51 USD/line. For the transaction of provision of software development services, assessee has used Transactional Net Margin Method [TNMM] and selected 10 comparables, whose arithmetic mean was computed at 9.53% as against its PLI of 10.52%. Accordingly, assessee submitted that international transactions are at arm s length. The Transfer Pricing Officer [TPO] however, did not agree with the CUP method adopted by assessee to its ITES business. He was of the opinion that since assessee is also involved in development of software for the purpose of medical transcription, entire activity of assessee has to be aggregated and to be considered as ITES only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Recipient entity Holding Company-iMedX Inc., USA Ultimate Holding Company-CBay USA Impugned transaction Application of CUP method for medical transcription services Application of CUP method for medical transcription services Internal CUP Available Available Transfer Pricing Officer (TPO)/Dispute TPO's findings TPO's findings Resolution Panel (DRP)/Income Tax Appellate Tribunal (ITAT) findings Ld.TPO rejected the application of CUP method for medical transcription services based on the following reasoning: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the revenues based on the number of lines transcribed but in case of taxpayer, revenue is based on cost incurred. CIT(A) findings- Similar services was availed by the holding company from third party entities in India on identical terms and conditions. Hence internal CUP is available The basis of estimation of cost of the taxpayer is unknown and hence the rate per line derived by the taxpayer is subject to assumptions. - CUP method was correctly applied by the Assessee to benchmark its international transactions as per OECD guidelines. - CIT(A) deleted the TP adjustment since the rates paid by the Assessee Company were well comparable with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... generated from CBay USA against average price realized from unrelated parties, which is same as in the case of the iMedX India. Ld.TPO has accepted the fact that CUP method is the most direct and reliable method to apply for determining the ALP in the current case. When information and data are available, the Ld.TPO should not have rejected the CUP method. High Court s Adjudication The Hon'ble High Court of Andhra Pradesh and Telangana has dismissed the Revenue s appeal and upheld CKar India s ITAT order when it was held that assessee followed one permissible method of computing the arm s length price and the same was held to be valid by the Tribunal and we see no reason to interfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases for the same assessment year, while doing the study. With these directions, the grounds of assessee are considered allowed for statistical purposes. ITA No. 617/Hyd/2016: 7. This is Revenue s appeal on the directions of the DRP with reference to exclusion of certain companies selected in ITES segment. Since we have not accepted the method adopted by the TPO and directed the AO/TPO to re-do the entire exercise afresh, appeal of Revenue becomes infructuous. Revenue, however, is free to raise any issue in case it is aggrieved on the TPO/DRP s orders in the consequential proceedings. With these observations, Revenue s appeal is considered infructuous accordingly, dismissed. 8. In the result, appeal of Assessee is allowed for stat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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