2014 (4) TMI 1106

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....in the business of software development. The return of income for the year under consideration was filed by the assessee on 30-10-2007 declaring total income of Rs. 5,57,88,432/-. During the course of assessment proceedings, a reference was made by the A.O. to the TPO u/s 92CA(1) of the Income Tax Act, 1961 for determining the Arm's Length Price (ALP) in relation to the international transactions of the assessee with its AE. One of such transactions was relating to the I.T. support services availed by the assessee company from its AE by making the payment of Rs. 15,73,624/-. In this regard, the assessee was called upon by the TPO to provide the basis of pricing of these transactions. The assessee was also required by the TPO to provide nece....

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....f the analysis conducted following TNMM, is at arm's length. iii. The TPO asked for certain details such as the allocation key, basis of calculation and the working of the IT support services received by the appellant. Further he has observed that the appellant could not provide the basis of the pricing of the transaction, allocation basis of cost and number of PCs deployed. The appellant before the TPO and during the instant proceedings has submitted that the payment has been made at the fixed standard rate of USD 2900 p.m. for the support services and as such it is not the case that such cost has been allocated to the appellant either on the basis of number of computers or number of hours used or anything o that sort. iv. In the det....

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....services also is considered as the cost and accordingly in such analysis conducted by the appellant this international transaction has been duly considered. viii. The TPO in his order has mentioned that the basis of pricing , allocation base of the cost and number of PCs has not been submitted by the appellant and accordingly the ALP of this international transaction has been taken at Nil. Such conclusion of the TPO is not supported by any fact of the kind that the appellant has not received such services as the appellant has mentioned to be receiving alongwith access to intranet group support services and right to use the application, and system software. Under such circumstances, the ALP of this transaction cannot be Nil. ix. There ....

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.... international transactions at "nil" was without any basis and accordingly he deleted the addition made on account of TP adjustments made by the A.O./TPO holding the same to be unsustainable. Aggrieved by the order of the ld. CIT(A), the Revenue has preferred this appeal before the Tribunal. 5. We have heard the arguments of both the sides and also perused the relevant material available on record. It is observed that the assessee's international transactions with its AE involving the availing of IT support services were bench-marked by the assessee in the TP study report by adopting the TNMM as the most appropriate method and selecting a set of external comparables. As noted by the ld. CIT(A) in his impugned order, this exercise of bench-....