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TMI Blog2020 (12) TMI 295X X X X Extracts X X X X X X X X Extracts X X X X ..... dopt CUP method if the nature of activity between the assessee and the A.E. and between the A.E. and the unrelated parties who are providing similar services to the A.E. is the same and if there is a difference in the nature of activity which would affect the determination of the ALP, then the TPO is free to examine and adopt the MAM in accordance with law after giving the ass a fair opportunity of hearing. Assessee's appeal is treated as allowed for statistical purposes. - ITA-TP No. 1755/Hyd/2019 - - - Dated:- 24-11-2020 - P. Madhavi Devi, Member (J) and A. Mohan Alankamony, Member (A) For the Appellant : H. Srinivasulu, Adv. For the Respondents : K. Ravi Kiran, D.R. ORDER P. Madhavi Devi, Member (J) This is assessee's appeal for the A.Y. 2015-16 against the final assessment order dated 31.10.2018 passed u/s. 143(3) r.w.s. 144C(5) of the I.T. Act, 1961. This appeal was taken up for hearing on 05.11.2020 through Video Conferencing and both the parties were heard. 2. Brief facts of the case are that the assessee company is providing I.T. Enabled Services to its Associated Enterprise (A.E.) The nature of transactions is medical transcription. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred in not excluding depreciation on goodwill from operating cost while computing the Profit Level indicator ('PU') of the Appellant, the order passed by the Ld. AO being not in conformity with the directions issued by the Hon'ble DRP under section 144C(5) of the Act, is bad in law and void. Transfer Pricing: A. Application of Comparable Uncontrolled Price ( CUP ) Method 3. On the facts and in the circumstances of the case and in law, the Ld. AO/Ld. TPO erred and the Hon'ble DRP further erred in upholding! confirming the action of Ld. AO/Ld. TPO in rejecting the Comparable Uncontrolled Price ('CUP') (in spite of availability of internal CUP) method for provision of information technology enabled services transaction and thereby applied Transactional Net Margin Method ('TNMM') as the most appropriate method for benchmarking the said transaction. 4. On the facts and in the circumstances of the case and in law Ld. AO/Ld. TPO erred and the Hon'ble DRP further erred in not following the Hon'ble Tribunal's decision in the Appellant's own case wherein the Hon'ble Tribunal has clearly directed the Ld. TPO/AO to adop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertaining to application of CUP method, on the facts and circumstances of the case and in contrary to law, the Ld. TPO erred and the Hon'ble DRP further erred in upholding/confirming the action of the Ld. TPO in accepting the following comparable companies, without appreciating that these companies were functionally dissimilar to the Appellant, have presence of brand and intangibles and huge turnover: Crossdomain Solutions Private Limited; Tech Mahindra Business Services Limited; Infosys BPO Limited; S P I Technologies India Private Limited; MPS Limited. 10. Without prejudice, on the facts and circumstances of the case and in contrary to law, the Ld. TPO erred in and the Hon'ble DRP further erred in upholding/confirming the action of the Ld. TPO in rejecting the Informed Technologies Limited engaged in providing ITeS as a comparables, without appreciating that the said company were functionally comparable to the Appellant: 11. Without prejudice to the ground no. 3 to 5 and 9, on the facts and circumstances of the case and in contrary to law, the Ld. TPO erred in incorrectly computing the margin of following comparable companies: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a part of the operating cost even though the same has been disallowed by the Ld. AO. E. Receivables 18. On the facts and circumstances of the case and in contrary to Jaw, the Ld. TPO erred in and the Hon'ble DRP further erred in upholding I confirming the action of the Ld. TPO in treating outstanding receivables as a separate international transaction and proposed to levy interest on the same. 19. On the facts and circumstances of the case and in contrary to law, Ld. TPO erred in and the Hon'ble DRP further erred in treating State Bank of India's ('SBI') term deposit rates as an appropriate CUP to benchmark the Assessee's delay in receipt of outstanding receivables. 20. On the facts and circumstances of the case and in contrary to law, Ld. TPO erred in and the Hon'ble DRP further erred in not considering the fact that the working capital adjustment evaluates the outstanding receivable in a controlled scenario vis- -vis uncontrolled scenario and that differential impact of working capital of the Assessee vis- -vis its com parables has already been factored in the pricing/profitability of the Assessee, and hence, proposing interest on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing regard to rival contentions and material placed on record, we find that there is no change in the nature of activity carried on by the assessee since A.Y. 2011-12 till the previous year relevant to the A.Y. before us. The modification of the agreements appears to be relating to the terms and conditions of payment. The Ld. Counsel for the assessee submitted that there is no change whatsoever with regard to transactions of the assessee with the A.E. and the transactions of the AE with other unrelated parties. If that is so, then, the CUP method has to be adopted. 5.1. In view of the same, we deem it fit and proper to set aside the assessment order and direct the AO to refer the matter to the TPO with a direction to adopt CUP method if the nature of activity between the assessee and the A.E. and between the A.E. and the unrelated parties who are providing similar services to the A.E. is the same and if there is a difference in the nature of activity which would affect the determination of the ALP, then the TPO is free to examine and adopt the MAM in accordance with law after giving the ass a fair opportunity of hearing. 5.2. The only other issue which needs adjudication is t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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