Dy.CIT, Circle-1(2), Hyderabad V. M/s CBay Systems Pvt. Ltd., Hyderabad

ITA 1148/HYD/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7625 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 06-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P SOMASEKHAR REDDY
• Assessee Lawyers: KRISHNA R PHATARPHEKAR
• Keywords: Transfer pricing; International transaction

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.1148/HYD/14 : ASSESSMENT YEAR 2008 - 09 DY. COMMISSIONER OF INCOME - TAX, CIRCLE 1(2), HYDERABAD V/S. M/S. CBAY SYSTEMS PVT. LTD. ( E RSTWHILE CKAR SYSTEMS PVT. LTD.), HYDERABAD (PAN - AACCC 1762 E) (APPELLANT) (RESPONDENT) APPELLANT BY : S HRI P.SOMA SEKHAR REDDY DR RESPONDENT BY : S/SHRI KRISHNA R. PHATARPHEKAR & HARSH R. SHAH DATE OF HEARING 08 . 1 0.2014 DATE OF PRONOUNCEMENT 13.10.2014 O R D E R PER P.M.JAGTAP, ACCOUNTANT MEMBER : THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) II, HYDERABAD DATED 14.3.2014, WHEREBY HE DELETED THE ADDITION OF RS.4,86,38,268 MADE BY THE AO/TPO ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, WHICH WAS A SUBSIDIARY OF CB A Y SYSTEMS INDIA PVT. L T D. (CBAY INDIA) DURING THE YEAR UN D E R CONSIDERATION. CBAY INDIA , IN TURN , IS A SUBSIDIARY OF CBAY SYSTEMS & SERVI C ES INC. , USA (CSSI) . THE ASSESSEE COMPANY IS ENGAGED IN TH E BU S IN ES S OF PROVIDIN G MEDICAL TRANSCRIPTION SERVICES AND THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FIL E D BY IT ON 29.9.2008, DECL A RING A LOSS OF R S .1,13,83,104. DURING TH E COU RS E OF ASSESSMENT PRO CEEDINGS , IT WAS N O T ICED BY THE ASSESSING OFFICER THAT THE ASSESSEE COMP AN Y I TA NO. 1148/H YD/20 14 M/S. CBAY SYSTEMS PVT. LTD.( E RSTWHILE CKAR SYSTEMS PVT. LTD.), HYDERABAD 2 HAS PROVIDED MEDICAL TRANSCRIPTION SERVI C ES TO ITS AE, VIZ. CSSI , USA, AND A TOTAL AMOUNT OF RS .10,63,10,324 WAS CHARGED FOR SUCH SERVICES. HE , THER E FORE, MA D E A R EFERENCE TO THE TPO UNDER S.92CA( 1) FOR DETERMINING THE ARMS LENGTH PRICE OF THE SAID IN T ERNATIONAL TRANSACTION S ENTERED INTO BY THE ASSESSEE COMPANY WITH ITS AE. IN THE TP STUDY REPORT, THE SAID INTERNATIONAL T R A NSACTION S WITH ITS AE WERE B E NCHMARKED BY THE ASSESSEE BY FOLLOWING CUP M ETHOD AND THE REASONS FOR FOLLO W IN G THE SAID METHOD BEIN G MOST APPROPRIATE METHOD, WERE EXPLAIN E D BY TH E ASSESSEE BEFORE THE A O/ TPO AS UNDER - (I) AS MENTIONED ABOVE, DURING THE Y EAR THE APPELLANT PROVIDED MEDICAL TRANSCRIPTION SERVI C ES TO ITS AE. THE AE ALSO RECEIVED IDENTICAL M E DICAL TRANSCRIPTIONS S ERVIC E S F R OM INDEPENDENT THIRD PARTIES IN INDIA. THE APP E LL A NT HAS SUBMITTED CUP DETAILS OF DHS INFO SYSTEMS PVT. LTD. AND SARAL SO F TWA R E SOLUTION S PRIVATE LIMITED. (II) CUP IS THE MOST DIRECT METHOD AND THE CUP METHOD RELIES ON I D ENTIFYING TR A NSAC T ION S O F COMPARABLE PRODUCTS /SERVI C E BETWEEN REL A TED AND UN R EL A TED P A RTIES, GIVEN SIMILAR CIRCUMSTANCES. WHEN A PRO D U C T/ - SER V I CE CO MPARABLE C AN BE IDENTIFIED, THI S METHOD WILL USUALLY P R OVI D E THE MOST RELIABLE M E ASURE OF AN ARMS LENGTH PRICE. DURIN G TH E PERIOD UNDER CONSIDERATION , DETAILS O F I N T ERNAL COMP A RABL E S WERE AVAILABLE. TH E AE ALSO PROCURES THE SAME SERVI C ES I.E. MEDICAL TR A NSCRIPTION SER V I C ES F R OM THIRD PARTIES IN INDIA AS ARE PROCURED FROM CK AR. (III) THE FUNCTION S PERFORMED BY THE INDEPENDENT THIRD PARTIES DHS AND SARAL FOR PRO V I D ING MEDICAL TRANSCRIP T ION SERVICES TO CSSI ARE SAME AS THOSE PERFORMED BY CKAR FOR CSSI. SIN C E THE NATURE OF MEDICAL TR A N S CRIP T ION S E R V ICES PROCU R ED FROM ALL TH E SE THIRD PARTIES IS IDENTICAL AND ALSO THE TERMS AND CON D IT I ONS AS WELL AS THE RATES CHARGED BY ALL TH E SE THIRD PARTIES TO CSSI ARE IDENTICAL, H E NCE FOR THE PU R POSE OF DETERMINING THE ARMS LENGTH PRICE, I TA NO. 1148/H YD/20 14 M/S. CBAY SYSTEMS PVT. LTD.( E RSTWHILE CKAR SYSTEMS PVT. LTD.), HYDERABAD 3 WE H A VE TAKEN DHS AND SARAL AS SAMPLE CO M P A RABLE COMPANIES. (IV) CSSI PAID 5 CENTS PER LINE TILL DECEMBER 31, 2007 AND 5.5. CENTS PER LINE TYPED FORM JANUARY 1, 2008 FOR RECEIPT OF IDENTICAL MEDICAL TRANSCRIPTION S ERVICES, TO THE INDEPENDENT THIRD PARTIES WH E REAS IT PAID CKAR AN ANNUAL AVERAGE O F 7 CENT S PER LINE (SUBJECT TO ADHERENCE OF QUALITY STANDARDS). (V) SIN C E THE RATES PAID BY CSSI TO CKAR ARE GR E ATER THAN THOSE PAID TO INDEPENDENT THIRD PARTIES IN I N D IA, TH E R E FORE IT WAS REASONABLY CON CL U D ED THAT THE IN TE RNATIONAL TRANSACTIONS OF CKAR WITH CSSI PERTAINING TO MEDICAL TR ANS C RIPTION SER VICES ARE CONSISTENT WITH THE ARMS LENGTH STANDARD S FROM TH E INDIAN TRAN S FER PRICING PERSP ECT IVE. THE CUP METHOD FOLLOWED BY THE ASSESSEE TO B EN CHMARK ITS INTERNATIONAL TRANS A CTION S WITH AE , HO W EVER WAS REJECTED BY THE TPO FOR THE FOLLOWING REASONS - (A) THE AVAILABILITY, RELIABILITY AND DEGREE OF COMPARABILITY IS NOT SATISFIED. (B) THE CONTRACT AGREEMENTS LOOK ALIKE BUT NATURE OF SERVICES NOT CLEAR FROM AGREEMENTS. (C) THAT THE ASSESSEE IS ENGAGED IN THE PRODUCT RELATED SOFTWARE DEVELOPMENT. (D) THAT MAN HOURLY RATES VARY WITH DOMAIN EXPERTISE AND EXPERIENCE. (E) FUNCTIONAL SIMILARITY BETWEEN THE SERVICES IS STRINGENT IN CUP METHOD AND DATA REGARDING MAN HOURLY RATES CHARGED BY INDEPENDENT ENTITIES ARE NOT AVA ILABLE IN PUBLIC DOMAIN. (F) AVERAGE RATE CANNOT BE ADOPTED AS ITS AVERAGE OUT VARIOUS TYPES OF SERVICES. I TA NO. 1148/H YD/20 14 M/S. CBAY SYSTEMS PVT. LTD.( E RSTWHILE CKAR SYSTEMS PVT. LTD.), HYDERABAD 4 AFTER REJECTIN G THE CUP METHOD, THE TPO ADOPTED TNMM AS THE MOST APPROPRIATE METHOD TO BENCHMARK THE IN T ERNA T IONAL TRANS A CTION S O F TH E ASSESSEE COMP ANY WITH IS AE AND APPLYIN G THE SAME, HE DETERMINED THE ARMS LENGTH PRICE OF THE SAID TRANSACTIONS AT RS.15,49,48,592. ACCORD I NGLY, IN THE ASSESSMENT COMPLETED UNDER S .143(3) READ WITH S.92CA OF THE ACT VIDE O R DER DATED 23.1. 2 012, THE ASSESSING OFFICER MADE AN ADDITION OF R S .4,86,38,268 TO THE TOTAL IN C OM E O F TH E ASSESSEE ON ACCOUNT O F TRAN S FER PRICING A D JU S TMENT. 3. AGAI N ST THE O R DER PASSED BY THE ASSESSING OFFICER UNDER S.143(3) RE AD WITH S.92CA(1), APPEAL WAS P R EFERRED BY TH E ASSESSEE BEFORE THE LEARNED CIT(A) AND V ARIO U S SUBMI S SION S WERE MA D E ON ITS BEHALF BEFORE THE LEARNED CIT(A) IN SUPPORT OF ITS CASE THAT THE TP ADJUSTMENT MADE BY THE ASSESSING OFFICER/TPO BY FOLLOWING TNMM WAS NOT SUSTAINABLE, AS THE CUP METHOD FOLLOWED BY THE ASSESSEE WAS THE MOST APPROPRIATE METHOD TO BENCHMARK THE INTERNATIONAL TRANS A CTIONS WITH ITS AE. THE SAID SUBMISSIONS, AS SUMMARISED BY THE LEARNED CIT(A) IN H ER IMPUGNED ORDER WERE AS UNDER - (A) THE RATE PER LINE PAID BY THE ASSOCIATED ENTERPRISE WAS US $ 0.06 4 PER LINE. COMPARED TO OTHER PARTIES, SINCE THIS BEING HIGHEST, THE SAME IS AT ARMS LENGTH PRICE. (B) THAT THE TRANSFER PRICING OFFICER CHERRY PICKED THE HIGHER RATE PAID BY AE TO THIRD PARTIES, WHEREAS THE AVERAGE RATE PER LINE OF ALL THE THIRD PARTIES WORKS OUT TO US $ 0.0060 PER LINE. THE ASSESSEE RECEIVED US $ 0.064 PER LINE. SINCE THIS IS HIGHER I TA NO. 1148/H YD/20 14 M/S. CBAY SYSTEMS PVT. LTD.( E RSTWHILE CKAR SYSTEMS PVT. LTD.), HYDERABAD 5 THAN WHAT IS RECEIVED BY INDEPENDENT PARTIES, THE SAME SHOULD BE CONSIDERED AT ARMS LENGTH. (C) THAT THE TRANSFER PRICING OFFICER STATED THAT PRICE PAID BY AE DEPENDS ON THE QUALITY OF SERVICES, HOWEVER, THE WORK OF MEDICAL TRANSCRIPTION DOES NOT REQUIRE HIGH QUALITY STANDARDS. BASIC QUALIFICATION FOR MEDICAL TRANSCRIPTIONIST IS TO KNOW ENGLISH LANGUAGE AND CERTAIN MEDICAL TERMS AND CONVERTING THE DICTATION GIVEN BY THE DOCTORS IN USA IN WRITTEN FORM WHICH DOES NOT REQUIRE VERY HIGH SKILLS. THE QUALITY OF WORK RENDERED BY ALL THIRD PARTIES ENTERPRISES IS THE SAME. (D) THE RATE PAID BY AE DOES NOT DEPEND ON QUANTUM OF WORK. RATE IS PAID ON PER LINE BASIS AND HAS NOTHING TO DO WITH QUANTUM OF WORK. (E) THAT THE APPELLANT IS NOT IN THE BUSINESS OF PRODUCT DEVELOPMENT SOFTWARE AS PRESUMED BY THE TRANSFER PRICING OFFICER. THE APPELLANT IS IN MEDICAL TRANSCRIPTION SERVICES WHICH HAS NOTHING TO DO WITH PRODUCT DEVE LOPMENT SOFTWARE. (F) THAT THE CUP METHOD SHOULD BE ACCEPTED AS INDEPENDENT INTERNAL COMPARABLES ARE AVAILABLE RENDERING THE SERVICES TO AE IN EXACTLY IDENTICAL CIRCUMSTANCES. 4. THE LEARNED C OMMISSIONER (A PPEALS ) FOUND M E RIT IN THE SUBMI S SION S MADE ON BEHALF O F THE ASSESSEE. SH E NOTED THAT THE CSSI USA WAS AVAILING SIMILAR SERVICES FROM OTHER THIRD PARTY ENTITIES IN INDIA ON IDENTICAL TERMS AND CONDITIONS AND SIN C E THOSE INTERNAL CUPS WERE AVAILABLE, THE CUP METHOD WAS CORRECTLY APPLIED BY THE ASSESSEE TO BENCHMARK ITS INTERNATIONAL T RANSACTIONS I TA NO. 1148/H YD/20 14 M/S. CBAY SYSTEMS PVT. LTD.( E RSTWHILE CKAR SYSTEMS PVT. LTD.), HYDERABAD 6 WITH AE EVEN AS P E R THE OECD GUIDELINES. SH E ALSO FOUN D TH A T THE RATES PAID BY THE CSSI U SA TO THE ASSESSEE CO M PANY WERE WELL CO M PARABLE WITH TH E RATES PAID BY THE SAID AE TO THE O T H E R THIRD PARTY ENTITIES IN IN D IA. SH E FURTHER NOTED THAT SIMILAR T.P ADJU S TM E N T M ADE IN THE CA S E OF THE ASSESSEE FOR ASSESSMENT YEAR 2005 - 06 BY THE ASSESSING OFFICER/TPO BY APPLYIN G TNMM METHOD WAS DELETED BY HER PREDECESSOR HOL D IN G THAT THE CUP MET H OD FOLLOWED BY TH E ASSESSEE WAS THE MOST APPROPRIATE METHOD AND THE SAID DECISION OF THE LEARNED CIT(A) WAS ALSO UPHELD BY THE T RIBUNAL VIDE I T S ORD E R DATED 19.10.2012 P A SSED IN ITA N O .565/ H YD/2011. ACCOR D INGLY, FOLLOW ING THE DECISION O F THE TRIBUNAL ON SIMILAR IS SUE IN AS SESSEE S OWN CA S E FOR ASSESSMENT YEAR 2005 - 06, THE LEARNED CIT(A) DELETED THE TP ADJUSTMENT MADE BY TH E ASSESSING OFFICER/TPO IN THE YEAR UNDER C O NSIDERA T ION, HOL D I NG TH A T THE CUP METHOD FOLLOWED BY THE ASSESSEE TO BENCHMARK THE IN TE RN A TION AL TRANSACTI ONS WITH ITS AE WAS THE MOST APPR O PRIATE METHOD IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A), REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 6. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT SIMILAR TRANS F ER P RICING ADJU S TMENT WAS MADE IN THE C A S E OF TH E ASSESSEE FOR ASSESSMENT YEAR 2005 - 06 , AND THE ORDER OF THE LEARNED CIT(A) DELETING THE ADDITION MADE IN THAT BEHALF WAS UP HELD BY THE T RIBUNAL FOR THE FOLLO W IN G REASONS GIVEN IN PARAGRAPH 11 OF ITS ORDER DATED 19.10.2012 , CITED SUPRA - 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. THE FACTS OF THE CASE HAVE BEEN EXHAUSTIVELY DEALT WITH BY THE CIT(A) IN HIS ORDER. I TA NO. 1148/H YD/20 14 M/S. CBAY SYSTEMS PVT. LTD.( E RSTWHILE CKAR SYSTEMS PVT. LTD.), HYDERABAD 7 IT IS A FACT ON RECORD THAT THE ASSESSEE HAS ADOPTED THE CUP METHOD FOR COMPUTING THE ARMS' LENGTH PRICE FOR THE INTERNATIONAL TRANSACTION ENTERED INTO BY IT WITH ITS AE FOR THE MEDICAL TRANSCRIPTION SERVICE RENDERED BY IT TO THE AE. I N THIS REGARD, THE ASSESSEE HAS CONSIDERED TWO EXTERNAL COMPARABLES AND THREE INTERNAL COMPARABLES. THE EXTERNAL COMPARABLES THE TWO INDIAN COMPANIES, M/S. ELICO LIMITED AND M/S. SHASTER TECHNOLOGIES LTD. HAVE ALSO ENTERED INTO AGREEMENTS WITH M/S. CBAY SY STEMS LTD. USA FOR PROVIDING MEDICAL TRANSCRIPTION SERVICES. SIMILARLY, THE ASSESSEE HAS ALSO ENTERED INTO AGREEMENT WITH THREE OVERSEAS CUSTOMERS (INTERNAL COMPARABLES) FOR PROVIDING MEDICAL TRANSCRIPTION SERVICES SIMILAR TO THE ONES PROVIDED BY ASSESSEE TO ITS AE. AS CAN BE SEEN FROM THE PRICE CHARGED BY THE ASSESSEE TO ITS AE, IN COMPARISON WITH THE PRICE CHARGED BY THE ASSESSEE TO ITS OTHER OVERSEAS CUSTOMERS, SO ALSO BY THE PRICE CHARGED BY THE OTHER TWO INDIAN COMPANIES, VIZ. ELICO LTD AND SHASTER TEC HNOLOGIES P. LTD. TO M/S. CBAY SYSTEMS, USA, IT IS CLEAR THAT THEY ARE ALMOST WITHIN SIMILAR RANGE. THE SERVICE RENDERED BY THE ASSESSEE TO ITS AE AS WELL AS TO THE OTHER OVERSEAS CUSTOMERS AND THE SERVICES RENDERED BY THE OTHER TWO INDIAN COMPANIES TO CBAY SYSTEMS IS ALSO SAME, I.E. MEDICAL TRANSCRIPTION WORK. THEREFORE, THE COMPARABLES ADOPTED BY THE ASSESSEE ARE UNCONTROLLED PARTIES AND CAN BE CONSIDERED FOR THE PURPOSE OF DETERMINING THE ARMS' LENGTH PRICE AS PER CUP METHOD. AS CA N BE SEEN FROM THE ORDER OF THE TPO, THOUGH THE TPO ACCEPTS THE FACT THAT CUP METHOD IS THE MOST DIRECT AND RELIABLE ONE TO APPLY FOR DETERMINING ARMS' LENGTH PRICE, HE REJECTS THE CUP METHOD ADOPTED BY THE ASSESSEE IN THE PRESENT CASE ON THE GROUND THAT I N THE ABSENCE OF INFORMATION, THE ASSESSEE'S STATEMENT THAT IN MEDICAL TRANSCRIPTION INDUSTRY, IN GENERAL, THE PRICE CHARGED PER LINE OF TRANSCRIPTION IS AROUND 00.6 US$ CANNOT BE ACCEPTED AND THAT APART, NO PUBLICLY AVAILABLE INFORMATION ON PRICES CHARGED IN INDEPENDENT TRANSACTIONS OF SIMILAR AND IDENTICAL NATURE THAT REFLECT THE CHARACTERISTICS OF THE SERVICES RENDERED BY THE ASSESSEE, HAS BEEN FURNISHED. THEREFORE, THE COMPARABLE FOR APPLYING THE CUP METHOD CANNOT BE ACCEPTED. THE TPO HAS FURTHER OBSERV ED THAT THE ASSESSEE ALSO ACCEPTS THAT THE TNMM METHOD IS A USEFUL METHOD FOR COMPUTING THE ARMS LENGTH PRICES IN ITS CASE. HOWEVER, SUCH FINDING OF THE TPO IS NOT CORRECT. IT IS SEEN FROM THE ORDER OF THE TPO ITSELF THAT IN RESPONSE I TA NO. 1148/H YD/20 14 M/S. CBAY SYSTEMS PVT. LTD.( E RSTWHILE CKAR SYSTEMS PVT. LTD.), HYDERABAD 8 TO HIS SHOW - CAUSE NOTI CE DATED 22.10.2008, THE ASSESSEE HAS STRONGLY OBJECTED TO THE PROPOSAL FOR APPLYING THE TNMM METHOD AND HAS REQUESTED FOR ACCEPTING THE CUP METHOD APPLIED BY THE ASSESSEE. THE ASSESSEE HAS SUBMITTED BEFORE THE TPO THAT IT HAS APPLIED THE CUP METHOD AFTER COMPARING THE FUNCTIONS PERFORMED AND THE RISKS UNDERTAKEN BY EACH ENTITY INVOLVED IN THE INTER - COMPANY TRANSACTIONS. THE TPO HAS BRUSHED ASIDE THE OBJECTIONS OF THE ASSESSEE BY SIMPLY OBSERVING THAT THE ASSESSEE HAS NOT PROVIDED QUANTITATIVE DETAILS WITH REFERENCE TO THE UNRELATED COMPARABLES. HOWEVER, SUCH FINDING OF THE TPO IS AGAIN NOT CORRECT, CONSIDERING THE FACT THAT THE ASSESSEE HAS FURNISHED ALL THE RELEVANT INFORMATION/DATA, REQUISITIONED BY THE TPO FROM TIME TO TIME. THIS F ACT IS VERY MUCH EVIDENT FROM PARA 1.1 OF THE ORDER OF THE TPO ITSELF. THEREFORE, THE FINDING OF THE TPO THAT THE ASSESSEE HAS NOT GIVEN THE QUANTITATIVE DETAILS IS WITHOUT ANY BASIS. IT IS A MATTER OF FACT THAT THE ASSESSEE HAS SUBMITTED THE AGREEMENTS BE TWEEN THE ASSESSEE AND ITS AE AS WELL AS THE AGREEMENTS ENTERED INTO BY THE AE WITH THE OTHER INDIAN COMPANIES AND THE AGREEMENTS BETWEEN THE ASSESSEE AND ITS OTHER OVERSEAS CUSTOMERS. THE ASSESSEE HAS ALSO SUBMITTED BILLS RAISED AND THE PRICES CHARGED FOR EACH LINE OF MEDICAL TRANSCRIPTION WORK BY THE ASSESSEE TO ITS AE AND BY THE INDIAN COMPANIES FOR THE SERVICES RENDERED TO CBAY SYSTEMS USA AND ALSO THE SERVICES RENDERED BY THE ASSESSEE TO THE OVERSEAS CUSTOMERS. ON PERUSING SERVICES RENDERED AND PRICE C HARGED FOR ALL THE AFORESAID TRANSACTIONS, IT IS SEEN THAT THE PRICE CHARGED BY THE ASSESSEE TO ITS AE ON EACH LINE OF MEDICAL TRANSCRIPTION WORK AT 0.063 US$ IS ALMOST EQUAL TO THE SIMILAR RATE CHARGED PER LINE ON MEDICAL TRANSCRIPTION WORK BY THE OTHER U NCONTROLLED PARTIES, CONSIDERED AS COMPARABLE BY THE ASSESSEE. THE OBSERVATION OF THE TPO THAT THE COMPARABLES CANNOT BE CONSIDERED TO BE UNCONTROLLED IS WITHOUT ANY BASIS, AND IT IS BASED ON MERE PRESUMPTIONS AND SURMISES. WHEN THE COMPARABLES CONSIDERED BY THE ASSESSEE ARE IN NO WAY CONNECTED EITHER WITH THE ASSESSEE OR WITH ITS HOLDING COMPANY, AND ALL THE INFORMATION/DATA RELATING TO THEIR TRANSACTIONS ARE AVAILABLE, THE TPO WAS NOT JUSTIFIED IN REJECTING THE COMPUTATION OF ALP MADE BY THE ASSESSEE BY A PPLYING THE CUP METHOD. THE CIT(A) HAS PASSED A WELL REASONED ORDER, ELABORATELY DISCUSSING THE VARIOUS ISSUES RAISED BY THE TPO AND ULTIMATELY CAME TO A I TA NO. 1148/H YD/20 14 M/S. CBAY SYSTEMS PVT. LTD.( E RSTWHILE CKAR SYSTEMS PVT. LTD.), HYDERABAD 9 CONCLUSION THAT THE CUP METHOD IS THE MOST APPROPRIATE METHOD FOR COMPUTING THE ALP FOR THE INTERNATIO NAL TRANSACTIONS ENTERED INTO BY THE ASSESSEE WITH ITS AE. WE FULLY AGREE WITH THE ORDER OF THE CIT(A) IN THIS BEHALF. WE ACCORDINGLY UPHOLD THE SAME AND REJECT THE GROUND OF THE REVENUE ON THIS ISSUE. 7. AS THE ISSUE INVOLVED I N THE YEAR UN D ER CON S I D ERATION AS WELL AS ALL THE M A TE R IAL FACTS RELEVANT THERETO ARE SIMILAR TO THAT OF ASSESSMENT YEAR 2005 - 06, WE RESPECTFULLY FOLLOW THE ORDER OF THE TRIBUN A L FOR ASSESSMENT YEAR 2005 - 06 AND UPHOLD THE IMPU G N E D ORD E R O F THE LEARNED CIT( A) DELETING THE ADDITION MADE BY THE AO/ TPO ON ACCOUNT O F TP ADJUSTMENT, BY HOL D I N G T H A T THE CUP METHOD FOLLOWED BY TH E ASSESSEE TO B E N CH MARK THE IN TE RN A TIONAL TRANSAC T ION S WITH ITS AE WAS THE MOST APPR O PRIATE METHOD IN THE FACTS AND CIRCUMSTANCES O F THE CASE AND NOT THE TNMM AS ADOPTED BY THE ASSESSING OFFICER/TPO. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE COURT ON 13 TH OCTOBER, 2014 SD/ - SD/ - ( SAKTIJIT DEY ) ( P.M.JAGTAP ) JUDICIAL MEMBER ACCOUNTANT MEMBER DT/ - 13 TH OCTO BER, 2014 COPY FORWARDED TO: 1. M/S. CBAY SYSTEMS PVT. LTD. (ERSTWHILE CKAR SYSTEMS PVT. LTD.), HYDERABAD 2 . DY. COMMISSIONER OF INCOME - TAX CIRCLE 1( 2 ), HYDERABAD 3. 4. COMMISSIONER OF INCOME - TAX(APPEALS) II, HYDERABAD COMMISSIONER OF INCOME - TAX I, HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S