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TMI Blog2015 (2) TMI 1321X X X X Extracts X X X X X X X X Extracts X X X X ..... ough sub agent GESA and remunerating it by paying the commission as per sub agency agreement. Out of the total services provided by the assessee a part is performed through sub-agent and the remaining is performed by the assessee itself. It is like export of goods partly manufactured by the assessee and partly purchased from third party. However, purchase price of the goods exported cannot be applied as CUP for sale price charged to the AE. Accordingly considering the price received by GESA as CUP is contrary to the transfer pricing regulation. We do not rule out the CUP as most appropriate method for determination of ALP of international transaction in question. However, the comparable uncontrolled price must be a proper uncontrolled price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on this issue and restore the same to the file of TPO/AO with the direction to decide the same afresh in the light of directions issued in the above said order. X X X X Extracts X X X X X X X X Extracts X X X X ..... that the order passed by Ld DRP is still in force and accordingly objected to the prayer put forth by Ld A.R. 4. At this juncture, the bench proposed to take up the appeal for hearing, since the issue contested before us has since been adjudicated by the co-ordinate bench of Tribunal in the assessee's own case relating to AY 2008-09 and 2009-10 (referred supra). Both the parties agreed to the same and accordingly the appeal was taken up for hearing. 5. We heard the parties and perused the record. As submitted by Ld A.R, the issue relating to T.P adjustment was considered by the Coordinate bench in AY 2008-09 in the order referred supra. For the sake of convenience, we extract below the operative portion of the order on the above said i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered as internal CUP for the purpose of determination of ALP for the services provided by the assessee to AE during the FY 2007-08 onwards. The TPO supported his action by referring Rule 10B(4) and took the old price to compare with the current years price. It appears that the TPO misunderstood the proviso to Rule 10B(4) of the Income tax Rules. In ordinary situation only current year/contemporaneous data can be used for comparing uncontrolled price with the controlled price. Only in the case of exceptional circumstances, the data relating to earlier years but not more than two years prior to the current year, can be used, if, such data reveals facts which can have an influence on the determination of arms- length-price in relation to the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lation to international transaction entered in current year. 6.2 The another aspect of considering the said price between GESA and assessee as internal CUP is that it does not satisfy the basic ingredient of a transaction between an unrelated party and associate enterprise of the assessee in the parity of the services provided by the assessee to the AE. United Nations Practical Manual on Transfer Pricing for Developing Countries has discussed the comparable uncontrolled price (CUP) in para-6.2.1.1 as under :- "6.2.1.1 The comparable Uncontrolled Price (CUP) Method compares the price charged for property or services transferred in a controlled transaction to the price charged for property or services transferred in a comparable un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.2.2 There is one more fallacy in the TPO's order regarding bifurcating the international transactions into two segments for determining the ALP. The TPO accepted the price charged by the assessee in respect of services provided through sub- agency, but while computing the ALP it had ignored the CUP and took the price charged by the assessee as ALP. Further, the services provided by the assessee on its own were compared with CUP. Therefore, two separate ALP were determined by the TPO for the same service provided by the assessee to AE. Even if the CUP is adopted as most appropriate method ALP cannot be more than price received by GESA. Whereas the TPO has taken into consideration the price charged by the assessee with 10% mark-up. He ..... X X X X Extracts X X X X X X X X Extracts X X X X
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