TaxTMI 
TaxTMI 
2022 (6) TMI 1367
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....ppeal Centre, Delhi dated 29.01.2021 for the assessment year 2017-18. 2. The assessee is a company and GCI Global Ventures, Mauritius owns 95% of the equity share capital of the assessee which is in turn a wholly owned subsidiary of Brillio LLC USA. The assessee is engaged in rendering software developer and support [SWD] services to third parties as well as to its Associated Enterprises [AEs]. 3. In terms of Sec.92B(1) of the Act, the transaction of providing SWD Services were "international transaction" i.e., a transaction between two or more associated enterprises, either or both of whom are non-residents, in the nature of purchase, sale or lease of tangible or intangible property, or provision of services, or lending or borrowing mone....
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....ing Cost [OP/OC] has been determined as the Profit Level Indicator [PLI] in the TNMM analysis. The assessee has undertaken the benchmarking as follows:- Particulars Exports AEs Non-AEs Non-AE IT Staffing Domestic Total INCOME Software Sales and Services Domestic - - - 43,31,97,179 43,31,97,179 Exports 1,60,07,64,665 32,41,l3,131 34,27,409 - 1,92,83,05,205 Other operating income Provision no longer required written back - - - 1,87,660 1,87,660 Liabilities written back - - 51,09,153 - 51,09,153 Bad debts recovered - - - 8,81,952 8,8....
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.... provided is at arm's length and that CUP method is applicable only in a scenario where the exact nature of the transactions can be replicated. On this basis, the TPO proceeded to make a fresh search of comparables whereby he arrived at median margin of 26.1% and made a TP adjustment of Rs.17,18,13,781. 8. Aggrieved, the assessee filed its objections before the DRP. The DRP confirmed the TP adjustment stating that the decisions cited by the assessee rendered by the ITAT Bangalore in assessee's own case for AYs 2011-12 to 2013-14 is not applicable for the year under consideration, since the TPO rejected the CUP method on the basis that it cannot match comparability criteria like similar market value and position in supply chain. The DRP als....
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....efore, those decisions cannot be applied for the year under consideration and the facts need to be looked into afresh. 12. We have considered the rival submissions and perused the material on record. We notice that the TPO in his order has made contradicting observations about the MAM followed by the assessee for determination of ALP. In para 6.2 the TPO has stated that the assessee has followed TNMM as MAM, whereas in para 7.2 he has noted that assessee has followed internal CUP method for arriving at the ALP. These observations of the TPO are reproduced below:- "6.2 The Arm's Length Price of the international Transactions in SWD segment provided to the Associated Enterprises (AE) has been determined by applying Transactional Net Ma....
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.... the assessee has placed the relevant evidence with respect to scope of work, nature of services rendered for AE and non- AE in the same countries. But these aspects were not examined by the TPO. Therefore, we set aside the order of the AO passed consequent to the order of the DRP and restore the issue to the AO/TPO to re-examine the issue of determination of ALP for international transactions in the light of the transactions made with non-AEs in the same countries. It is settled position of law that if internal benchmarking is possible, the TPO should go with the internal benchmarking instead of going for external benchmarking by collecting various comparables from the database. In the instant case, since the assessee has placed the eviden....