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TMI Blog2023 (3) TMI 254X X X X Extracts X X X X X X X X Extracts X X X X ..... compared to previous two years and thus, TPO ought to have followed CUP method selected by the assessee for benchmarking international transactions with its AEs. DRP without appreciating the above facts, has simply upheld TNMM as most appropriate method and upheld the TP adjustment as suggested by the TPO. Hence, we reverse the findings of the DRP and direct the TPO to consider CUP as most appropriate method to bench mark international transactions with its AEs. Accordingly, we direct the TPO to delete the addition made towards TP adjustment made towards AE sales. TP adjustment towards corporate guarantee - assessee company has given a corporate guarantee for the foreign currency loan of US from Axis Bank, Hong Kong to its AE XIUS holdings USA and computed guarantee commission @1% on total corporate guarantee given by the assessee to its AE and has made adjustment - HELD THAT:- We find that after amendment of definition of international transaction, corporate guarantee given by any entity to its AE falls under the definition of international transactions in terms of sec.92B of the Act and thus, any corporate guarantee given by the assessee to its AE is an international transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake different stand on same set of facts on the applicability of quantum of services provided, quality and nature of services provided, geographical location of the customers, credit, market risk when applying CUP method and when applying TNMM? 7. Without prejudice to the ground that TNMM is not the most appropriate method, the DRP/AO erred in making a separate upward adjustment on Corporate guarantee provided to the Associated Enterprise (AE) when adopting TNMM as most appropriate method. 8. The AO/DRP erred in not disclosing the standard filters used by him/them for choosing comparables under TNMM? 9. The AO/DRP erred in not disclosing the arithmetical computation of determining the PLI (Operating Profit/Operating Cost) of the Appellant under TNMM. 10.Whether the AO/DRP is right in arbitrarily rejecting the CUP method and chosing TNMM without justifying it as Most Appropriate Method randomly picking their choice comparables without disclosing the filters used for choosing such comparables? 11.Whether the AO/DRP is right in choosing companies such as Larsen Toubro Infotech Ltd and Mindtree Ltd and Persistent Systems Ltd having turnover of Rs 2959.56 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e method. The TPO, after conducting fresh TP study, has selected certain comparables and then, compared with operating margin of the assessee and suggested TP adjustment of Rs.4,40,89,432/- towards AE sales and also made upward adjustment on corporate guarantee of Rs.58,80,000/- @ 1% on total corporate guarantee given by the assessee. Pursuant to TP adjustment as suggested by the TPO, the AO has passed draft assessment order u/s.144C of the Act, on 30.03.2016 and made downward adjustment of Rs.4,99,69,432/-. The assessee has filed objections before the DPR, Panel-2, Bengaluru, against draft assessment order passed by the AO and challenged TP adjustment as suggested by the TPO. The assessee has challenged rejection of CUP as most appropriate method and selection of TNMM to bench mark international transactions. The assessee had also challenged computation of operating margins by considering two extraordinary items of bad debts written off and forex fluctuation loss. The assessee had also challenged TP adjustment on corporate guarantee and argued that rate at which the TPO benchmarked on corporate guarantee is higher side. The DRP after considering relevant submissions of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % from non-AE transactions. The assessee has earned margin on sales @18.81% and margin on cost of 24.61%. The assessee has considered internal CUP on the basis of transactions with third party customers and claimed margin earned on AE sales is higher than the third party sales. Therefore, he submitted that when there is no change in facts and circumstances of the case for the impugned assessment year when compare to previous two assessment years, then there is no reason for the TPO/DRP to reject the CUP method adopted by the assessee for bench marking international transactions with its AEs. In this regard, he relied upon the decision of the Hon ble Supreme Court in the case of Radhasoami Satsang v. CIT reported in [1992] 193 ITR 321 (SC). 6. The Ld.DR, on the other hand, supporting the order of the DRP submitted that in earlier assessment years the margin of the assessee was 23.64% for the AY 2011-12 and 21.88% for the AY 2010-11. Therefore, under those facts, the TPO has accepted CUP method adopted by the assessee for bench marking international transactions with its AEs. However, for the impugned assessment year, the margin has been drastically come down and therefore, the TP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered a different approach or method for considering any issue. In this case, as pointed out by the Ld.AR for the assessee, there is no change in the facts and circumstances of the case for the impugned assessment year when compared to previous two years and thus, we are of the considered view that the TPO ought to have followed CUP method selected by the assessee for benchmarking international transactions with its AEs. The DRP without appreciating the above facts, has simply upheld TNMM as most appropriate method and upheld the TP adjustment as suggested by the TPO. Hence, we reverse the findings of the DRP and direct the TPO to consider CUP as most appropriate method to bench mark international transactions with its AEs. Accordingly, we direct the TPO to delete the addition made towards TP adjustment made towards AE sales. 8. The next issue that came up for our consideration from the assessee s appeal is TP adjustment towards corporate guarantee given by the assessee to its AE. The assessee company has given a corporate guarantee for the foreign currency loan of US from Axis Bank, Hong Kong to its AE XIUS holdings USA. The AO has computed guarantee commission @1% on total ..... X X X X Extracts X X X X X X X X Extracts X X X X
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