TaxTMI 
TaxTMI 
2023 (1) TMI 469
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....ising following grounds of appeal:- "1. That on the facts and in the circumstances of the case and in law, ld. CIT(A) has erred in not adjudicating upon the Respondent-assessee's submissions against the application of special provisions of adjustments Section 92 to 92F (transfer pricing) to the international transactions of the respondent-assessee. 2. That on the facts and in the circumstances of the case and in law, ld. CIT(A) has erred in not adjudicating upon, on merits, the submissions of the respondent-assessee against adjustment as made in the order u/s. 92CA(3) of the Act and followed in the assessment order." 03. The cross objection is merely supportive in nature. 04. The brief facts of the case of the shows thatassessee is a company engaged in the business of providing revenue cycle management services focusing on US healthcare segment. It is providing business process outsourcing services. This company is wholly owned subsidiary in the United States which provides marketing and sale services to the assessee. Assessee furnished the return of income declaring total loss of Rs.12,91,71,248/- on 29th November, 2011. 05. Assessee has entered the international trans....
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....ifying the assessee as an ITES company using the capitaline and prowess database, The learned Transfer Pricing Officer selected 6 comparable taking PLI of OP/TC whose margin was 21.17% whereas the margin of the assessee was computed at (-) 35.47% and made an adjustment of Rs.7,78,08,046/-. The order under Section 92CA (3) was passed by DCIT (TP) 1(1)(1), Mumbai dated 30th January, 2015. 08. Based on this, the assessment order under Section 143(3) of the Act was passed on 5thMay 2015 determined total income of the assessee at a loss of Rs.5,13,63,202/- against the return loss of Rs.12,91,71,248/-. 09. Assessee preferred the appeal before the learned CIT (A), who passed an order dated 31stJanuary 2018, wherein he upheld that foreign Associated Enterprises is correctly taken as a tested party by the assessee as it was having least risk and simpler entity. He directed the learned Transfer Pricing Officer to take the foreign Associated Enterprises as a tested party. He also held and directed the learned Assessing Officer to consider the comparability analysis whether the assessee has taken the correct comparable and determined adjustment if require. Accordingly, he directed TPOto comp....
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....eting/marketing services or business/financial advisory, but it is the business of the AE of the appellant." 011. The learned Departmental Representative vehemently supported the order of the learned Transfer Pricing Officer and held that the learned CIT (A) is incorrect in holding that foreign Associated Enterprises is to be taken as tested party. It was submitted that if foreign Associated Enterprises istaken as tested party the comparability analysis becomes difficult. He therefore submitted that order of the learned CIT (A) should be reversed, and order of the learned Assessing Officer/Transfer Pricing Officer should be restored. He further stated that the learned CIT (A) does not have any power of setting aside to the learned Assessing Officer or Transfer Pricing Officer. 012. The learned Authorized Representative on the appeal of the learned Assessing Officer supported the order of the learned CIT (A) and further stated that CIT (A) failed to adjudicate on other issues. He submitted a paper book containing 308 pages as well as another paper book containing 24 pages along with extract form OECD TP guidelines UNTPGuidelines, US transfer pricing regulations and guidance note o....
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....s is located in various locations i.e., USA, Europe, Asia specific and therefore, it becomes difficult to determine the appropriate Arm's Length Price with respect to each transaction in each region. The learned CIT (A) on this issue has categorically held that the foreign Associated Enterprises is the least complex entity and therefore there is no reason that same cannot be taken as a tested party. 015. The discussion on benchmarking of the transaction has taking the Associated Enterprises as the tested party is at Para no.6.10 of the order of the learned Transfer Pricing Officer is as under: - "6.10 Rejection of Associated Enterprises as the tested party The assessee made the following submissions as to why the AE may be considered as the tested party: IKS India is clearly the risk bearing entrepreneurial entity, responsible for the entire risk and reward arising out of the services it provides to its customers. It is the developer and owner of all intangibles. As submitted earlier, IKS Inc is engaged in provision of support services for which it is remunerated on a cost-plus mark-up basis. Therefore, in comparison with IKS India, IKS Inc is the least complex entity. IKS Inc....
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.... shown that such earlier year data had an influence in determining the price. Further, the earlier year data can be used provided the condition is satisfied, and also is in addition to the current year data. The taxpayer did not give any reasons as to how the earlier year data had an influence over the pricing either in the case of taxpayer or in the case of uncontrolled enterprises." 016. The learned CIT (A) held that there is no infirmity in taking the foreign Associated Enterprises as a tested party. The learned CIT (A) in Para 9 held as under: - "9. The matter is examined. I find that the appellant has rebutted each of the items listed by Assessing officer for not treating IKS Inc as tested party. In this case there is only one AE, and such AE need not be based in India. The 3-year data and F.Y. difference are adjustable issues when comparable are selected and analysis for inclusion/elimination. If usage of data of 3 years is not acceptable, Assessing Officer after recording reasons can change the same but usage of data of 3 years is not a determining factor as to who the tested party should be. Moreover, the assessee has provided single year date during course of proceeding....