TaxTMI 
TaxTMI 
2015 (2) TMI 202
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....d subsidiary of Trinity Corporation Inc., USA, which is owned by three shareholders, namely, Shri Srinath Alleppa, Mr. Jeff Slosar and Mr. Issa Elkhoury having equal shareholding. For the AY under consideration, assessee filed its return of income on 21/08/2002 declaring total income of Rs. 8,920 after claiming exemption u/s 10B. During the scrutiny assessment proceeding, AO noticing that assessee has entered into international transaction with its Associated Enterprises (AE) made a reference to the Transfer Pricing Officer (TPO) for determining Arm's Length Price (ALP). In course of proceeding before him, TPO noticed that assessee has entered into a master contract with its AE on 28/03/2000. As per clause 5 of the agreement, hourly rate has been agreed at USD 10 per man hour for design and development of product in E-commerce, maintenance services, support services, manpower and supported services including all site services. The total man hour billed was 120448.5 hours and the price charged was USD 1204485. Thus, as per the 3CEB report/TP document, revenue earned from international transactions with its AE converted to Indian currency was to the tune of Rs. 5,75,68,918. The TPO o....
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....s WIPRO is not at all feasible. As submitted by the assessee's counsel, the assessee is a new entrant in the field and came into business in March, 2000 and being so the assessee is not in a position to charge at 22 USD per man hour as that of M/s WIPRON is charging. M/s WIPRO is a large industrial giant undertaking working independently with principles to principle relationship. On the other hand, the assessee is dependent contractor. The assessee has also stated before us that the billing rate changes depending upon the various factors as enumerated in the report of NASCOM which has been filed by the assessee before the CIT(A) and not considered the same as being additional evidence. There is a force in the arguments of the assessee's counsel. As we have observed earlier, the rate chargeable by M/s WIPRO cannot be comparable to assessee's case. Being so, in our opinion, the Assessing Officer is required to bring on record the comparable case to determine the price. If the Assessing Officer is unable to bring on record the comparable case, the Assessing Officer is at liberty to consider the rate adopted by the assessee immediate next year and thereaf ter he is required to discount....
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.... "We find force in the arguments of TPO Rule 10AB has been inserted by the Income Tax (sixth amendment) Rules, 2012 w.e.f. 01/04/2012 and shall apply to AY 2012-13 and subsequent years. Therefore, the quotation as provided by the appellant cannot be treated as a valid CUP and accordingly the ground of appeal is rejected. The evidence of quotation given by M/s Inspira Technologies P. Ltd. as comparable cannot be considered as valid comparable on the ground that it has not been materialized nor the said company has delivered services at such quoted prices to any company. Further, the quotation is submitted by the assessee appears to have been issued at the personal request and not quoted in regard to any public notice. Hence, the quotation is not reliable comparison by any stretch of imagination. The appellant has also contended that the TPO ought to have used TNMM as an alternate method. However, we find from the directions of the ITAT that in case no comparable is available then next year's rate is to be taken and from that rate of inflation has to be reduced to arrive at the current year's price. The TPO has followed the directions of th....
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....isions and availability and collection of structured data is very difficult and hence ought to have taken the third party quotation obtained by AE on record and examined the same to determine the ALP." 8. As can be seen from the grounds raised, assessee is basically aggrieved with the decision of the TPO and DRP in rejecting quotation obtained by assessee and determination of ALP by adopting the rate charged by assessee in the subsequent FY. 9. The learned AR submitted before us that in order dated 09/01/2015 passed in M.A. No. 136/Hyd/2014, the Tribunal has modified its earlier order by deleting the alternative direction given to AO to consider the rate adopted by assessee in the immediate next year. Thus, after the order passed in M.A., the only option left to AO for determining the ALP is by applying the CUP method. In these circumstances, determination of ALP by TPO and confirmed by DRP on the basis of the price charged by assessee in the immediate next year is invalid. 10. Ld. DR, though, agreed that direction given by the ITAT stands modified, but, she submitted that both TPO and assessee having failed in their attempt to obtain comparable cases for determining ALP under C....