Tribunal remits issue for reconsideration based on Delhi High Court judgment. Revenue appeals allowed. TPO to review transfer pricing method.

The Tribunal remitted the issue back to the TPO for reconsideration in light of the Delhi High Court's judgment. The appeals of the Revenue were allowed for statistical purposes, and the TPO was directed to consider the appropriateness of the TNMM over the CUP method for determining the ALP of the international transactions.

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Issues Involved:
1. Condonation of delay in filing the appeal.
2. Appropriateness of the Comparable Uncontrolled Price (CUP) method versus the Transactional Net Margin Method (TNMM) for determining the Arm's Length Price (ALP) of international transactions.

Detailed Analysis:

1. Condonation of Delay:
The Revenue's appeal for the assessment year 2011-12 was filed late by 13 days. The condonation petition filed by the Revenue was accepted as the reasons shown were justified. Consequently, the delay was condoned, and the appeal was admitted.

2. Appropriateness of CUP vs. TNMM:
The central issue in both appeals was whether the CUP method or the TNMM should be used to determine the ALP of the international transactions.

Facts and Observations:
- The Transfer Pricing Officer (TPO) categorized most email correspondences as 'Stewardship Services,' which do not require separate payment per OECD guidelines.
- The TPO argued that substantial management activities were performed by the assessee itself and that the CUP method was appropriate for benchmarking the management fee transaction.
- The TPO scrutinized the documents submitted by the assessee and questioned whether independent parties would pay for such services.
- The TPO determined the ALP for various services by analyzing specific emails, concluding that some services did not warrant payment, while others did, partially.

Dispute Resolution Panel (DRP) Findings:
- The DRP disagreed with the TPO, stating that the CUP method was inappropriate due to the lack of reliable and correct data.
- The DRP noted that the TPO's approach of treating each email as an independent transaction and determining the ALP based on limited evidence was improper.
- The DRP emphasized that the TNMM was more suitable for determining the ALP of the management services, as the transactions were intricately interconnected and could not be disaggregated.

Arguments by the Parties:
- The Revenue argued that the CUP method was the most direct and appropriate method for determining the ALP, as it allows for benchmarking each transaction separately.
- The assessee contended that the DRP's view was correct, as the evidence produced was sufficient and the TNMM was appropriate when expenses could not be segregated or analyzed individually.

Tribunal's Decision:
- The Tribunal referred to the case of M/s. Knorr Bremsc India Pvt Ltd. Vs. ACIT, where it was held that the TPO should not disallow expenses on the grounds that the assessee suffered continuous losses.
- The Tribunal noted that the Delhi High Court had remanded a similar issue to the TPO for reconsideration, emphasizing that the transactional net margin method might be more appropriate.

Conclusion:
The Tribunal remitted the issue back to the TPO for reconsideration in light of the Delhi High Court's judgment. The appeals of the Revenue were allowed for statistical purposes, and the TPO was directed to consider the appropriateness of the TNMM over the CUP method for determining the ALP of the international transactions.

Order Pronouncement:
The order was pronounced on 24th August 2016, at Chennai.

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