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TMI Blog2018 (4) TMI 1635X X X X Extracts X X X X X X X X Extracts X X X X ..... ification that the margins shown by tested party i.e. foreign associated enterprise was at arm's length price of margins shown by comparables selected by the assessee, the matter was remitted back to the file of Assessing Officer / TPO for verification. The issue which arose in earlier year and since the international transactions undertaken by the assessee were identical to the international transactions undertaken in earlier years, hence following the same parity of reasoning, we hold that TNMM method was the most appropriate method to be applied to benchmark arm's length price of international transactions of fees paid for advisory and other services by taking foreign associated enterprise as tested party. AO is directed to benchmark the transactions by taking margins of foreign comparables which were selected by the assessee in earlier year and even in the year under consideration. However, to verify the claim of assessee that the margins shown by assessee and the mean margins shown by the comparables were within +/- 5% range, the Assessing Officer is directed to comply with the directions of Tribunal as in earlier year and compute arm's length price of international transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 10,85,12,147/- be deleted. 2. On the facts and in the circumstances of the case, and in law, the Ld DRP and Ld AO, following the directions of the Ld DRP, erred in determining the arm's length price of the transaction pertaining to payment of fees for advisory and other services by the Appellant to its associated enterprises ('AEs') as 'Nil' as against ₹ 10,85,12,147/- determined by the Appellant and thereby making a TP adjustment of ₹ 10,85,12,147/-. The Appellant prays that the book value of the international transaction be accepted to be the arm's length price of the said transaction and the TP adjustment made by the Ld DRP / Ld AO be deleted. 3. On the facts and in the circumstances of the case, and in law, the Ld DRP and Ld AO, following the directions of the Ld DRP, erred in applying Comparable Uncontrolled Price ('CUP') Method for determining the arm's length price without identifying any valid comparable uncontrolled transaction to determine the arm's length price. The Appellant prays that the method selected by the Appellant ought to be accepted and the TP adjustment made by the Ld DRP / Ld AO be delete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parables may be applied and the matter may be verified by the Assessing Officer / TPO with respect to the margins of finally selected comparables. 5. The learned Departmental Representative for the Revenue on the other hand, placed reliance on the orders of Assessing Officer / DRP. 6. We have heard the rival contentions and perused the record. The issue arising in the present appeal before the Tribunal is against determination of arm's length price of transactions pertaining to payment of fees for advisory and other services by the assessee to its associated enterprises. The assessee had paid sum of ₹ 10,85,12,147/- to its associated enterprises and had declared that no adjustments were warranted in its hands on account of said international transactions. However, the TPO made an upward adjustment of ₹ 10,85,12,147/-, which was assessed in the hands of assessee as the DRP dismissed the objections raised by the assessee against draft assessment order made by the Assessing Officer. 7. We find that similar issue of adjustment, if any, on account of payment of fees for advisory and other services by the assessee to its associated enterprises, arose before the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, the same are not being reproduced. Thus, the grounds of appeal raised by the assessee in assessment year 2011-12 are allowed. 9. Now, coming to the appeal of assessee in ITA No.2847/PUN/2016, relating to assessment year 2012-13. 10. The learned Authorized Representative for the assessee pointed out that the ground of appeal No.1 raised by the assessee is general in nature. The ground of appeal No.2 raised by the assessee is against adjustment made on account of international transactions pertaining to payment of fees for advisory and other services by the assessee to its associated enterprises, wherein an upward adjustment of ₹ 9,43,77,453/- was made in the hands of assessee. The said issue is identical to the issue raised in earlier years and following the same parity of reasoning, we hold that TNMM method is the most appropriate method with foreign associated enterprise as tested party. The margins shown by the assessee need to be compared with foreign companies which are engaged in providing similar services. For the limited purpose of verifying the margins of comparables, we direct the Assessing Officer to verify the claim of assessee and compute the arm's le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the assessee pointed out that four new comparables were picked up by the TPO and the issue which is raised vide ground of appeal No.3 was against inclusion of two concerns Excel Infoways Ltd. and Universal Print Systems Ltd. He pointed out that the concern Excel Infoways Ltd. could not be selected as it was showing fluctuating margins in preceding years. It was further pointed out by the assessee that the annual report of the said company shows that ITES and BPO segments were closed in financial year 2011-12 on account of global recession and planned to diversify into real estate business. Another distinguishing feature was the low employee cost filter. The learned Authorized Representative for the assessee pointed out that employee cost over sales ratio of the said concern was less than 25% as against employee cost of 47.75% of assessee. In this regard, the learned Authorized Representative for the assessee placed reliance on the ratio laid down by the Mumbai Bench of Tribunal in Goldman Sachs Services (P.) Ltd. Vs. ITO (2015) 69 SOT 28 (Mumbai Trib.). In respect of second concern Universal Print Systems Ltd., the learned Authorized Representative for the assessee again pointe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re-computed at 23.13% resulting in upward adjustment of ₹ 33,40,000/-. The assessee is in appeal against the said adjustment made in ITES segment. The plea of assessee during the course of hearing was that in case two concerns i.e. Excel Infoways Ltd. and Universal Print Systems Ltd. were excluded from the final list of comparables, then the margins shown by the assessee and mean margins of comparables were within +/- 5% range and no TP adjustment had to be made in the hands of assessee. 16. Coming to the first concern Excel Infoways Ltd., wherein the assessee points out that the said concern was not to be selected as comparable because of its fluctuating margins. The learned Authorized Representative for the assessee has filed tabulated details in this regard, wherein the margins of said concern being drastically dropped from 267.31% in earlier years to 41.48% during the year under consideration. The year-wise margins of said concern are as under:- Financial Year OP/TC margin 2008-09 247.74% 2009-10 267.31% 2010-11 238.7 ..... 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