2017 (3) TMI 478 - AT - Income Tax

Tribunal directs new transfer pricing methods for medical transcription and software development

The Tribunal upheld the Assessee's objections, directing the Transfer Pricing Officer to use the Comparable Uncontrolled Price (CUP) method for medical ... TPA - ALP determination - MAM - Held that:- Assessee and Ckar India are in the same line of business i.e., medical transcription services and Co-ordinate Bench in the above said case of ACIT Vs. M/s. Ckar Systems (P) Ltd.[2013 (2) TMI 65 - ITAT HYDERABAD ] has upheld the Ld.CIT(A)’s order that CUP method is the most appropriate method for computing ALP for the international transactions entered into by assessee with its AE in that case. Since the facts are similar, we are of the opinion that TPO should have adopted CUP method only for analysing the assessee’s International transactions. Accordingly, we uphold assessee’s objections with reference to the adoption of method and direct the AO/TPO to adopt CUP method for the medical transcription services and TNMM for the software development services. AO/TPO is directed to re-do the exercise afresh giving due opportunity to assessee and determine the ALP accordingly. Exclusion of certain companies selected in ITES segment - Held that:- Since we have not accepted the method adopted by the TPO and directed the AO/TPO to re-do the entire exercise afresh, appeal of Revenue becomes infructuous. Revenue, however, is free to raise any issue in case it is aggrieved on the TPO/DRP’s orders in the consequential proceedings. With these observations, Revenue’s appeal is considered infructuous accordingly, dismissed Issues:Cross-appeals by Assessee and Revenue for AY. 2011-12 against the order(s) of the Assessing Officer passed u/s.143(3) r.w.s. 92CA of the Income Tax Act, consequent to the directions given u/s. 144C(5) by the Dispute Resolution Panel, Bengaluru.Analysis:The Assessee is engaged in providing medical transcription services and software development to its Associated Enterprise. The Transfer Pricing Officer (TPO) disagreed with the Assessee's adopted methods, leading to disputes. The TPO rejected the CUP method and selected comparables for the ITES segment, resulting in TP adjustments. The Dispute Resolution Panel (DRP) rejected the Assessee's contentions. The Assessee argued for the adoption of the CUP method based on a precedent case. The Tribunal upheld the Assessee's objections, directing the TPO to use the CUP method for medical transcription and TNMM for software development, re-doing the TP study.The Tribunal noted similarities between the Assessee and another company regarding medical transcription services, where the CUP method was deemed appropriate. The Tribunal directed the TPO to adopt the CUP method for the Assessee's international transactions. The Tribunal allowed the Assessee's objections and instructed the TPO to re-do the TP study, considering similar cases for the same assessment year. The Assessee's grounds were considered allowed for statistical purposes.The Revenue's appeal, concerning the exclusion of certain companies in the ITES segment, was deemed infructuous due to the Tribunal's direction to re-do the entire TP study. The Revenue was given the option to raise issues in subsequent proceedings if aggrieved by the TPO/DRP's orders. The Tribunal allowed the Assessee's appeal for statistical purposes and dismissed the Revenue's appeal.In conclusion, the Tribunal upheld the Assessee's objections regarding the adoption of the CUP method for medical transcription services and directed a re-assessment, while deeming the Revenue's appeal infructuous. The judgment provided detailed analysis and directions for the TP study, ensuring fairness and compliance with relevant legal provisions.