Appeals allowed for fresh comparables search & re-examination of services provision

The Tribunal allowed the appeals for statistical purposes, directing the TPO to conduct a fresh search for comparables and to re-examine the provision of management and support services, considering the detailed submissions and evidences provided by the assessee. The TPO was instructed to provide a reasonable opportunity of being heard to the assessee in both matters. The appeals were disposed of accordingly, and the stay petitions became otiose.

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Issues Involved:
1. Transfer Pricing Adjustments for Sales and Post-Sales Support Services.
2. Provision of Management and Support Services.
3. Use of Comparables for Benchmarking.

Issue-wise Detailed Analysis:

1. Transfer Pricing Adjustments for Sales and Post-Sales Support Services:
The assessee, a subsidiary of Converse Network Systems Europe BV, engaged in providing various services to its Associated Enterprises (AEs), used the Transactional Net Margin Method (TNMM) for benchmarking its international transactions. The Transfer Pricing Officer (TPO) disagreed with the use of multiple year data and the filters applied by the assessee for selecting comparables. The TPO applied his own set of filters and selected different comparables, leading to a higher Arm's Length Price (ALP) and a proposed adjustment. The Dispute Resolution Panel (DRP) upheld the TPO's adjustments. The Tribunal found that the comparables selected by both the assessee and the TPO were functionally different and directed a fresh search for comparables similar to the assessee's functions, restoring the issue to the TPO for reconsideration.

2. Provision of Management and Support Services:
The TPO took the Comparable Uncontrolled Price (CUP) of management and support services at NIL, questioning the tangible benefits derived from such services. The DRP upheld this view. The Tribunal noted that the assessee had provided detailed submissions and documentary evidence regarding the services utilized, which were not properly considered by the TPO/DRP. The Tribunal directed the TPO to re-examine the issue, considering the detailed submissions and evidences furnished by the assessee, and to decide the matter afresh after giving the assessee a reasonable opportunity of being heard.

3. Use of Comparables for Benchmarking:
The TPO rejected the comparables used by the assessee, citing functional differences, and selected his own set of comparables. The Tribunal observed that the comparables selected by both parties were functionally different from the assessee's functions. Referring to a previous decision in the assessee's own case for A.Y 2008-09, the Tribunal directed a fresh search for comparables with functional similarity to the assessee's segment of sales and post-sales support. The TPO was instructed to decide the issue afresh, considering the functions, assets, and risks of the comparables.

Conclusion:
The Tribunal allowed the appeals for statistical purposes, directing the TPO to conduct a fresh search for comparables and to re-examine the provision of management and support services, considering the detailed submissions and evidences provided by the assessee. The TPO was instructed to provide a reasonable opportunity of being heard to the assessee in both matters. The appeals were disposed of accordingly, and the stay petitions became otiose. The order was pronounced in the open court on 31st July, 2018.

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