Tribunal favors appellant, orders reconsideration of Profit Split Method for international transactions.

The Tribunal found in favor of the appellant, directing the Transfer Pricing Officer to reconsider the Profit Split Method (PSM) as the most appropriate method for benchmarking international transactions. The Tribunal emphasized the importance of consistency with judicial precedent set in a prior case involving the appellant's predecessor entity. The appellant's appeal was allowed for statistical purposes, and the matter was remitted back to the TPO for a fresh decision in line with the Co-ordinate Bench's directions, ensuring the appellant's right to a fair hearing.

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Issues Involved:
1. Disregarding Profit Split Method (PSM) as the most appropriate method for benchmarking Appellant's international transactions.
2. Applying the Transactional Net Margin Method (TNMM) instead of PSM.
3. Rejection of the judicial precedent in the case of the Appellant's predecessor entity.

Issue-wise Detailed Analysis:

1. Disregarding Profit Split Method (PSM):
The assessee argued that the issue is covered in its favor by the decision of the ITAT in the predecessor entity's case, Global One India Private Limited (GOIPL). The assessee contended that it follows the same business model, operations, services, and employs the same management personnel and employees as GOIPL. The Tribunal noted that the assessee had applied the PSM, which was not approved by the Transfer Pricing Officer (TPO), who instead considered TNMM as the most appropriate method. The Tribunal found that similar reasoning was applied in the predecessor's case, and the Co-ordinate Bench had already deliberated and accepted PSM as the appropriate method.

2. Applying Transactional Net Margin Method (TNMM):
The TPO's rejection of PSM in favor of TNMM was based on the argument that no unique intangibles or value-added services were provided by the assessee. The Tribunal observed that the TPO's reasoning was identical to that in the GOIPL case, where the Co-ordinate Bench had rejected the TPO's justification for using TNMM. The Tribunal noted that the TPO's conclusion that the assessee's business does not have any integration with other group entities and operates independently in India was not accepted by the Co-ordinate Bench in the predecessor's case.

3. Rejection of Judicial Precedent:
The Tribunal highlighted that the DRP and the TPO did not address the judicial precedent set in the GOIPL case, despite it being cited by the assessee. The Tribunal emphasized that the TPO's reasoning that res judicata does not apply in transfer pricing proceedings was incorrect. The Co-ordinate Bench had held that consistency should be a rule rather than an exception, and the TPO did not provide valid reasons to depart from the earlier view of accepting PSM as the most appropriate method.

Conclusion:
The Tribunal concluded that the issue is covered by the order of the Co-ordinate Bench in the GOIPL case. It directed the TPO to reconsider the application of PSM as the most appropriate method, following the directions given by the Co-ordinate Bench. The Tribunal allowed the assessee's appeal for statistical purposes and remitted the matter back to the TPO for a fresh decision in accordance with the law, ensuring that the assessee is given a reasonable opportunity of being heard.

Order Pronounced:
The order was pronounced in the open court on 08th May 2015.

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