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TMI Blog2022 (6) TMI 1367X X X X Extracts X X X X X X X X Extracts X X X X ..... . Since the TPO in the present year under consideration has proceeded to make the TP adjustment on the mistaken fact that assessee has followed CUP method, we deem it fit and appropriate to remit this issue back to the TPO for fresh analysis considering the actual method followed by the assessee i.e., TNMM as the MAM. The TPO is also directed to consider the principles laid down by the coordinate Bench of the Tribunal in the earlier years in assessee s own case in terms of considering the internal comparables for TNMM and also the stand taken by the TPO for the AY 2016-17 where the internal comparables has been accepted. Appeal by the assessee is allowed for statistical purposes. - SP No.5/Bang/2022 & IT(TP)A No.128/Bang/2022 - - - Dated:- 8-6-2022 - BEFORE SMT. BEENA PILLAI, JUDICIAL MEMBER AND Ms. PADMAVATHY S, ACCOUNTANT MEMBER For the Appellant : Shri Naresh K. Jain, Advocate For the Respondent : Shri M S Nethrapal, Addl. DIT ORDER Per Padmavathy S., Accountant Member This appeal is at the instance of assessee directed against the final order of assessment passed u/s. 143(3) r.w.s. 144C(13) of the Income-tax Act, 1961 [the Act] by the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received a total revenue of Rs.160,07,64,655 in respect of international transaction of provisions of SWD services to its AE. The ALP of the transaction in SWD segment provided to AE has been determined by applying Transactional Net Margin Method [TNMM] to be the Most Appropriate Method [MAM]. The Operating Profit to Operating Cost [OP/OC] has been determined as the Profit Level Indicator [PLI] in the TNMM analysis. The assessee has undertaken the benchmarking as follows:- Particulars Exports AEs Non-AEs Non-AE IT Staffing Domestic Total INCOME Software Sales and Services Domestic - - - 43,31,97,179 43,31,97,179 Exports 1,60,07,64,665 32,41,l3,131 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Rs.9,78,74,270 which was processed u/s. 143(1) of the Act. Subsequently, the case was selected for scrutiny under CASS on various parameters. The assessee has entered into large value of international transactions and therefore a reference was made to the Transfer Pricing Officer [TPO] for determination of ALP. The TPO rejected the tax payer s TP study stating that the assessee has used internal CUP method to arrive at the conclusion that SWD services provided is at arm s length and that CUP method is applicable only in a scenario where the exact nature of the transactions can be replicated. On this basis, the TPO proceeded to make a fresh search of comparables whereby he arrived at median margin of 26.1% and made a TP adjustment of Rs.17,18,13,781. 8. Aggrieved, the assessee filed its objections before the DRP. The DRP confirmed the TP adjustment stating that the decisions cited by the assessee rendered by the ITAT Bangalore in assessee s own case for AYs 2011-12 to 2013-14 is not applicable for the year under consideration, since the TPO rejected the CUP method on the basis that it cannot match comparability criteria like similar market value and position in supply chain. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Operating Cost ration has been taken as the Profit Level Indicator (PLI) in TNMM analysis. **** 7.2 The Taxpayer has used, Internal CUP method to come arrive at a conclusion that the Software Development Services (SWD) were provided at arm's length. The CUP is applicable in the scenarios where the exact nature of the transaction can be replicated. 13. The basis on which the TPO has proceeded with the comparability analysis is on the wrong fact that the assessee followed CUP method as the MAM. The DRP has also not taken note of this contradicting findings of the TPO in his order and has proceeded to confirm the TP adjustment made by the TPO. The assessee in its TP study at pages 69 70 of PB has clearly stated that the MAM followed in arriving at the ALP by the assessee is TNMM. 14. Now coming to the issue of application of internal TNMM and other external comparables followed by the assessee, we notice that the coordinate Bench of the Tribunal in assessee s own case for the AYs 2011-12 2012-13 in ITA Nos. 518/Bang/2016 354/Bang/2016 by order dated 19.1.2018 has upheld the internal TNMM used by the assessee for determination of the ALP for international ..... X X X X Extracts X X X X X X X X Extracts X X X X
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