Triniti Advanced Software Labs Pvt Ltd, Hyderabad V. ITO., Ward-2(2), Hyderabad

ITA 1427/HYD/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87255 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 06-01-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 28-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G APARNA RAO
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Transfer pricing; International transaction; Additional evidence
• Section: 143(3); 92F; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 1427/HYD/2014 ASSESSMENT YEAR: 2002-03 TRINITI ADVANCED SOFTWARE LABS PVT. LTD., SECUNDERABAD. PAN AAACE 7968 E INCOME TAX OFFICER, WARD 2(2), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI K.A. SAIPRASAD REVENUE BY SMT. G. APARNA RAO DATE OF HEARING 29-01-2015 DATE OF PRONOUNCEMENT 04-02-2015 O R D E R PER SAKTIJIT DEY, J.M.: THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST ASSESSM ENT ORDER DATED 23/06/14 PASSED U/S 143(3) READ WITH SE CTION 144C OF THE ACT IN PURSUANCE TO THE DIRECTIONS OF THE DISPU TE RESOLUTION PANEL (DRP) RELATING TO AY 2009-10. 2. AT THE OUTSET WE NEED TO CLARIFY, THE APPEAL WAS EARLIER HEARD ON 06/01/2015. HOWEVER, SUBSEQUENTLY, ASSESSEE ON 1 9/01/2015 SUBMITTED A LETTER STATING THEREIN THAT THE DIRECTI ONS GIVEN BY THE TRIBUNAL IN ORDER DATED 15/07/2011 PASSED IN ITA NO . 1129/HYD/2005 HAS BEEN MODIFIED BY THE TRIBUNAL IN ORDER DATED 09/01/2015 PASSED IN M.A. NO. 136/HYD/2015. IN VIEW OF SUCH DEVELOPMENT, APPEAL WAS REFIXED FOR HEARING ON 29/0 1/2015. 2 ITA NO. 1427/HYD/2014 TRINITI ADVANCED SOFTWARE LAB PVT. LTD. 3. BRIEFLY THE FACTS ARE, ASSESSEE AN INDIAN COMPAN Y IS ENGAGED IN SOFTWARE DEVELOPMENT. IT IS A WHOLLY OWNED SUBSI DIARY OF TRINITY CORPORATION INC., USA, WHICH IS OWNED BY THREE SHAR EHOLDERS, NAMELY, SHRI SRINATH ALLEPPA, MR. JEFF SLOSAR AND M R. ISSA ELKHOURY HAVING EQUAL SHAREHOLDING. FOR THE AY UNDER CONSIDE RATION, ASSESSEE FILED ITS RETURN OF INCOME ON 21/08/2002 D ECLARING TOTAL INCOME OF RS. 8,920 AFTER CLAIMING EXEMPTION U/S 10 B. DURING THE SCRUTINY ASSESSMENT PROCEEDING, AO NOTICING THAT AS SESSEE HAS ENTERED INTO INTERNATIONAL TRANSACTION WITH ITS ASS OCIATED ENTERPRISES (AE) MADE A REFERENCE TO THE TRANSFER P RICING OFFICER (TPO) FOR DETERMINING ARMS LENGTH PRICE (ALP). IN COURSE OF PROCEEDING BEFORE HIM, TPO NOTICED THAT ASSESSEE H AS ENTERED INTO A MASTER CONTRACT WITH ITS AE ON 28/03/2000. A S 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-COM MERCE, MAINTENANCE SERVICES, SUPPORT SERVICES, MANPOWER AN D SUPPORTED SERVICES INCLUDING ALL SITE SERVICES. THE TOTAL MAN HOUR BILLED WAS 120448.5 HOURS AND THE PRICE CHARGED WAS USD 120448 5. THUS, AS PER THE 3CEB REPORT/TP DOCUMENT, REVENUE EARNED FRO M INTERNATIONAL TRANSACTIONS WITH ITS AE CONVERTED TO INDIAN CURRENCY WAS TO THE TUNE OF RS. 5,75,68,918. THE TPO ON EXAM INATION OF THE FACTS AND MATERIALS ON RECORD, NOTICED THAT DURING THE YEAR WIPRO HAD RENDERED SIMILAR SERVICES TO ASSESSEES AE AND HAD CHARGED HOURLY RATE OF USD 22. HE ALSO NOTICED THAT IN THE FOLLOWING FYS I.E. FY 2002-03 AND 2003-04, ASSESSEE HAS INCREASED THE RATE PER MAN HOUR TO USD 18 AND 29 RESPECTIVELY. THEREFORE, TPO CONSIDERING THE RATE CHARGED BY WIPRO AND ALSO RATE ADOPTED BY ASSESSEE FOR SUBSEQUENT YEARS ADOPTED RATE OF USD 18 AFTER MAKI NG ADJUSTMENTS UNDER CUP TOWARDS THE NATURE OF SERVICE S PROVIDED, TURNOVER, NUMBER OF EMPLOYEES, AGE OF THE COMPANY, GEOGRAPHICAL 3 ITA NO. 1427/HYD/2014 TRINITI ADVANCED SOFTWARE LAB PVT. LTD. LOCATION, QUALITY OF MANPOWER USED VIS--VIS WIPRO. AS A RESULT, THE ALP OF THE SERVICE RENDERED WAS DETERMINED AT USD 2 1,68,073, WHICH RESULTED IN DETERMINATION OF ALP OF RS. 10,40 ,67,504 AS AGAINST RS. 5,75,68,918 SHOWN BY ASSESSEE. THE RESU LTANT SHORTFALL WAS, THEREFORE, TREATED AS ADJUSTMENT U/S 92CA(3) O F THE ACT. IN TERMS WITH THE ORDER PASSED BY TPO, AO MADE ADDITIO N OF RS. 4,64,98,586 WHILE COMPLETING ASSESSMENT U/S 143(3) OF THE ACT. BEING AGGRIEVED OF THE ASSESSMENT SO MADE, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A). THOUGH, LD. CIT(A) UPHELD THE RATE PER MAN HOUR OF USD 18 ADOPTED BY TPO TO BE APPROPRIATE , HOWEVER, HE HELD THAT FURTHER ADJUSTMENT OF 5% IS TO BE ALLO WED ON ACCOUNT OF MATERIAL DIFFERENCES BETWEEN ASSESSEE AND WIPRO. STILL AGGRIEVED WITH THE ORDER PASSED BY LD. CIT(A), BOTH ASSESSEE AND THE DEPARTMENT PREFERRED APPEAL BEFORE ITAT. 4. ITAT WHILE DISPOSING OF THE CROSS APPEALS REGIST ERED AS ITA NO. 1129/HYD/05 AND 19/HYD/06 DATED 15/07/11 HELD T HAT RATE CHARGED BY WIPRO CANNOT BE CONSIDERED TO BE COMPARA BLE TO ASSESSEES CASE. THE TRIBUNAL DIRECTED AO TO BRING ON RECORD COMPARABLE CASE TO DETERMINE THE PRICE UNDER CUP ME THOD. FURTHER, THE TRIBUNAL OBSERVED THAT IF AO IS UNABLE TO BRING COMPARABLE CASE, THEN, HE MAY CONSIDER THE RATE ADO PTED BY ASSESSEE IN THE IMMEDIATE NEXT YEAR AND THEREAFTER TO DISCOUNT THE SAME AFTER CONSIDERING THE INFLATIONARY RATE. THE T RIBUNAL OBSERVED THAT ONCE AO ARRIVES AT THE DISCOUNTED RATE, THERE IS NO NEED TO ALLOW ANY FURTHER ADJUSTMENT AT 5% AS DIRECTED BY L D. CIT(A). RELEVANT OBSERVATION OF THE ITAT IS EXTRACTED HEREU NDER FOR THE SAKE OF CONVENIENCE: 9. FIRSTLY, IN OUR OPINION, COMPARISON OF ASSESSEE S PRICE WITH THE PRICE OF THE M/S WIPRO IS NOT AT ALL FEASIBLE. AS SUBMITTED BY THE ASSESSEES COUNSEL, T HE ASSESSEE IS A NEW ENTRANT IN THE FIELD AND CAME INT O BUSINESS IN MARCH, 2000 AND BEING SO THE ASSESSEE I S 4 ITA NO. 1427/HYD/2014 TRINITI ADVANCED SOFTWARE LAB PVT. LTD. 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 LAR GE 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 ASSESS EE BEFORE THE CIT(A) AND NOT CONSIDERED THE SAME AS BE ING ADDITIONAL EVIDENCE. THERE IS A FORCE IN THE ARGUM ENTS OF THE ASSESSEES COUNSEL. AS WE HAVE OBSERVED EARLIE R, THE RATE CHARGEABLE BY M/S WIPRO CANNOT BE COMPARABLE T O ASSESSEES CASE. BEING SO, IN OUR OPINION, THE ASS ESSING OFFICER IS REQUIRED TO BRING ON RECORD THE COMPARAB LE CASE TO DETERMINE THE PRICE. IF THE ASSESSING OFFICER I S UNABLE TO BRING ON RECORD THE COMPARABLE CASE, THE ASSESSI NG OFFICER IS AT LIBERTY TO CONSIDER THE RATE ADOPTED BY THE ASSESSEE IMMEDIATE NEXT YEAR AND THEREAFTER HE IS REQUIRED TO DISCOUNT THE SAME AFTER CONSIDERING THE INFLATIONARY RATE. ONCE HE ARRIVED AT THE DISCOUNT ED RATE, THERE IS NO QUESTION OF FURTHER GIVING ANY DEDUCTIO N TOWARDS ANY ADJUSTMENTS AT 5%. ACCORDINGLY, WE DIR ECT THE ASSESSING OFFICER TO FOLLOW THE CUP METHOD AS ADOPTED BY THE ASSESSEE ITSELF IN THIS ASSESSMENT Y EAR. HOWEVER, HE HAS TO RE-DETERMINE THE TPO AS PER THE ABOVE DIRECTIONS. 5. IN PURSUANCE TO THE DIRECTIONS OF THE TRIBUNAL, THE TPO TOOK UP THE PROCEEDINGS AGAIN FOR DETERMINATION OF ALP O F THE INTERNATIONAL TRANSACTION. IN COURSE OF THE PROCEED ING, ASSESSEE SUBMITTED A QUOTATION OBTAINED FROM M/S INSPIRA TEC HNOLOGIES P. LTD., 144, 2 ND FLOOR, AKASH GANGA, SRINIGAR COLONY, HYDERABAD AS A CUP. TPO OBSERVED THAT AS PER THE SAID QUOTATION THE COMPANY HAD OFFERED A RATE OF USD 10 PER MAN HOUR INITIALLY AND FROM THE BEGINNING OF 7 TH MONTH TO USD 12 PER MAN HOUR. TPO, HOWEVER, DID NOT ACCEPT THE SUBMISSIONS OF ASSESSEE BY OBSERVING THAT AS PER RULE 10B(1)(A) UNDER THE CUP ACTUAL HAPPENING OF AN EVENT IS CONSIDERED. IN OTHER WORDS, THE COMPARABLE TRANSACT ION IS IDENTIFIED WHERE A PRICE HAS BEEN ACTUALLY CHARGED OR PAID AND SUITABLE ADJUSTMENT IF REQUIRED ARE TO BE MADE TO ARRIVE AT THE ALP. 5 ITA NO. 1427/HYD/2014 TRINITI ADVANCED SOFTWARE LAB PVT. LTD. HOWEVER, IN A CASE WHERE THE PRICE IS CHARGEABLE OR PAYABLE THAT CANNOT BE DONE. TPO OBSERVED THAT QUOTATION OBTAINE D BY ASSESSEE CANNOT BE A SUBSTITUTE FOR AN EVENT WHICH HAS ALREADY OCCURRED. TPO OBSERVED THAT ASSESSEES CLAIM COULD HAVE BEEN CONSIDERED IN TERMS OF RULE 10AB BUT SINCE THE SAME IS EFFECTIVE FROM AY 2012-13, THE QUOTATION OBTAINED BY ASSESSEE CANNOT BE CONSIDERED AS A VALID CUP. AFTER REJECTING QUOTATIO N OF ASSESSEE AND OBSERVING THAT NO OTHER COMPARABLE IS AVAILABLE , TPO PROCEEDED TO COMPUTE ALP AS PER SECOND OPTION GIVEN BY ITAT BY CONSIDERING THE RATE CHARGED BY ASSESSEE TO ITS AE FOR FY 2002-03 AT USD 18 PER MAN HOUR. AFTER GIVING A DISCOUNT OF 3.81% TOWARDS INFLATION RATE IN 2003, RATE PER MAN HOUR WAS WORKE D OUT AT USD 17.31 WHICH RESULTED IN DETERMINATION OF ALP AT RS. 10,00,78,250 AND THE RESULTANT SHORTFALL OF RS. 4,25,09,332 WAS TREATED AS ADJUSTMENT U/S 92CA OF THE ACT. IN TERMS WITH THE O RDER OF TPO, AP PASSED THE DRAFT ASSESSMENT ORDER ADDING THE AMOUNT OF RS. 4,25,09,332 TOWARDS TP ADJUSTMENT. 6. ASSESSEE OBJECTED TO THE TP ADJUSTMENT BEFORE TH E DRP. DRP, HOWEVER, SUSTAINED THE ORDER OF TPO BY OBSERVI NG AS UNDER: 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 PROVI DED 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 TECH NOLOGIES P. LTD. AS COMPARABLE CANNOT BE CONSIDERED AS VALID COMPARABLE ON THE GROUND THAT IT HAS NOT BEEN MATER IALIZED NOR THE SAID COMPANY HAS DELIVERED SERVICES AT SUCH QUOTED PRICES TO ANY COMPANY. FURTHER, THE QUOTATION IS SU BMITTED BY THE ASSESSEE APPEARS TO HAVE BEEN ISSUED AT THE PER SONAL REQUEST AND NOT QUOTED IN REGARD TO ANY PUBLIC NOTI CE. HENCE, THE QUOTATION IS NOT RELIABLE COMPARISON BY ANY STR ETCH OF IMAGINATION. 6 ITA NO. 1427/HYD/2014 TRINITI ADVANCED SOFTWARE LAB PVT. LTD. 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 COMPARAB LE IS AVAILABLE THEN NEXT YEARS RATE IS TO BE TAKEN AND FROM THAT RATE OF INFLATION HAS TO BE REDUCED TO ARRIVE AT TH E CURRENT YEARS PRICE. THE TPO HAS FOLLOWED THE DIRECTIONS O F THE ITAT. THE TPO OR THE LOWER AUTHORITY DOES NOT HAVE ANY PO WERS TO DEVIATE FROM THE DIRECTIONS OF THE ITAT AND, THEREF ORE, THERE IS NO INFIRMITY IN THE ORDER OF THE TPO. ACCORDINGL Y, WE DECLINE TO INTERFERE WITH THE ORDER OF THE TPO AND THE GROUND OF OBJECTION IS REJECTED. AS A RESULT OF THE ORDER PASSED BY THE DRP REJECTIN G ASSESSEES OBJECTION, AO PASSED THE IMPUGNED ORDER CONFIRMING THE ADDITION OF RS. 4,25,09,332. 7. BEING AGGRIEVED OF THE ORDERS OF AO AND DRP, ASS ESSEE HAS PREFERRED THE PRESENT APPEAL RAISING THE FOLLOWING GROUNDS IN THE MEMORANDUM OF APPEAL: 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER U/S 143(3) R.W.S 144C DT. 23/06/14 BY THE ITO IS UNJUST IFIED, INCORRECT AND NOT AS PER LAW. 2. THE AO/DRP IS NOT JUSTIFIED IN NOT PERUSING THE VALID THIRD PARTY QUOTATION OBTAINED BY AE AND FILED BY THE APP ELLANT, WITHOUT TAKING THE SAME ON RECORD AND EXAMINING THE SAME IN DETAIL. 3. THE AO/DRP OUGHT TO HAVE APPRECIATED THE FACT TH AT ALP IS DEFINED EXHAUSTIVELY U/S 92F (II) AS A PRICE W HICH IS APPLIED OR PROPOSED TO BE APPLIED IN A TRANSACTION BETWEEN PERSONS OTHER THAN ASSOCIATED ENTERPRISES, IN UNCON TROLLED CONDITIONS AND HENCE OUGHT TO HAVE CONSIDERED THE THIRD PARTY QUOTATION OBTAINED BY AE AND FILED BY THE ASS ESSEE. 4. AO/DRP IS INCORRECT IN COMMENTING THAT THE QUOT ATION SUBMITTED BY THE ASSESSEE APPEARS TO HAVE BEEN ISSU ED AT THE PERSONAL REQUEST AND NOT QUOTED IN REGARD TO AN Y PUBLIC NOTICE KNOWING WELL THAT AE AND THE ASSESSEE ARE C LOSELY HELD COMPANIES NOT OBLIGATED TO FLOAT PUBLIC TENDER S AND FURTHER WITHOUT EXAMINING AND CONSIDERING THE THIRD PARTY QUOTATION OBTAINED BY THE AE. 7 ITA NO. 1427/HYD/2014 TRINITI ADVANCED SOFTWARE LAB PVT. LTD. 5. AO/TPO/DRP IS INCORRECT IN NOT ASCERTAIN THE ALP UNDER CUP METHOD BY TAKING THE QUOTATION FILED BY ASSESSE E, FAILING TO DISCHARGE THE ONUS CREATED BY ITAT AND BY SIMPLY ADOPTING THE EASIER ALTERNATE METHOD SUGGESTED BY T HE ITAT. 6. AO/TPO/DRP IS INCORRECT IN NOT APPRECIATING THE FACT AY 2002-03 IS THE FIRST YEAR OF IMPLEMENTATION OF TP P ROVISIONS AND AVAILABILITY AND COLLECTION OF STRUCTURED DATA IS VERY DIFFICULT AND HENCE OUGHT TO HAVE TAKEN THE THIRD P ARTY 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 AN D DRP IN REJECTING QUOTATION OBTAINED BY ASSESSEE AND DETERM INATION OF ALP BY ADOPTING THE RATE CHARGED BY ASSESSEE IN THE SUB SEQUENT FY. 9. THE LEARNED AR SUBMITTED BEFORE US THAT IN ORDER DATED 09/01/2015 PASSED IN M.A. NO. 136/HYD/2014, THE TRI BUNAL HAS MODIFIED ITS EARLIER ORDER BY DELETING THE ALTERNAT IVE DIRECTION GIVEN TO AO TO CONSIDER THE RATE ADOPTED BY ASSESSEE IN T HE IMMEDIATE NEXT YEAR. THUS, AFTER THE ORDER PASSED IN M.A., T HE ONLY OPTION LEFT TO AO FOR DETERMINING THE ALP IS BY APPLYING THE CU P METHOD. IN THESE CIRCUMSTANCES, DETERMINATION OF ALP BY TPO AN D CONFIRMED BY DRP ON THE BASIS OF THE PRICE CHARGED BY ASSESSE E 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 A ND ASSESSEE HAVING FAILED IN THEIR ATTEMPT TO OBTAIN COMPARABLE CASES FOR DETERMINING ALP UNDER CUP METHOD, TPO HAD NO OTHER OPTION BUT TO COMPUTE ALP AS PER SECOND OPTION DIRECTED BY ITA T. LD. DR SUBMITTED THAT SINCE THE COMPARABLE CASE PROVIDED B Y ASSESSEE IS ONLY A QUOTATION WITHOUT ANY OTHER AUTHENTIC DOCUME NT TO SHOW THAT THE PRICE MENTIONED IN THE SAID QUOTATION WAS ACTUA LLY CHARGED BY 8 ITA NO. 1427/HYD/2014 TRINITI ADVANCED SOFTWARE LAB PVT. LTD. THE SAID PARTY, THE SAME CANNOT BE ACCEPTED. THUS, LD. DR SUBMITTED THAT IN THE GIVEN CIRCUMSTANCES, TPO WAS CORRECT IN DETERMINING THE ALP IN COMPLIANCE TO THE DIRECTION OF THE TRIBUNAL. 11. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL A S OTHER MATERIALS ON RECORD. THIS IS SECOND JOURNEY OF ASSE SSEE TO THE TRIBUNAL. ON THE EARLIER OCCASION WHILE DISPOSING O FF THE APPEALS OF ASSESSEE AS WELL AS THE DEPARTMENT, THE TRIBUNAL HA S GIVEN A CLEAR DIRECTION TO TPO TO DETERMINE THE ALP UNDER THE CUP METHOD BY BRINGING COMPARABLE CASES ON RECORD. OF COURSE IT D IRECTED THE TPO, AS A SECOND OPTION, TO ADOPT THE RATE CHARGED BY ASSESSEE IN THE SUBSEQUENT FY IN CASE NO COMPARABLE CASE IS AVA ILABLE UNDER THE CUP. HOWEVER, THE TRIBUNAL WHILE CONSIDERING T HE MISCELLANEOUS APPLICATION OF ASSESSEE REGISTERED AS M.A. NO. 136/HYD/2014 IN ORDER DATED 09/01/2015 MODIFIED THE APPEAL ORDER BY DELETING DIRECTION GIVEN TO TPO TO CONSIDER THE RATE ADOPTED BY ASSESSEE IN THE IMMEDIATE NEXT YEAR. THUS, AFTER T HE ORDER DATED 09/01/2015 PASSED IN M.A., THE ONLY OPTION LEFT TO AO/TPO FOR DETERMINING ALP IS BY APPLYING CUP METHOD. AS ALP D ETERMINED BY TPO AND CONFIRMED BY DRP IS NOT UNDER CUP METHOD , THE SAME IS INVALID. RULE 10B(1)(A) OF IT RULES PRESCRIBES T HE METHOD FOR DETERMINATION OF ALP UNDER CUP. AS PER THE SAID PRO VISION, TPO AT FIRST HAS TO FIND OUT THE PRICE CHARGED OR PAID FOR PROPERTY TRANSFERRED OR SERVICES PROVIDED IN A COMPARABLE UN CONTROLLED TRANSACTION OR A NUMBER OF SUCH TRANSACTIONS AND TH EREAFTER MAKING NECESSARY ADJUSTMENTS OF SUCH PRICE ON ACCOUNT OF DIFFERENCES BETWEEN THE INTERNATIONAL TRANSACTIONS AND COMPARAB LE UNCONTROLLED TRANSACTIONS OR BETWEEN THE ENTERPRISE S ENTERING INTO SUCH TRANSACTIONS WHICH COULD MATERIALLY AFFECT THE PRICE IN THE OPEN MARKET, TPO WILL HAVE TO DETERMINE ALP. THEREF ORE, UNLESS, 9 ITA NO. 1427/HYD/2014 TRINITI ADVANCED SOFTWARE LAB PVT. LTD. COMPARABLES ARE BROUGHT ON TO BENCHMARK THE PRICE C HARGED BY A PARTICULAR ASSESSEE, IT CANNOT BE SAID THAT THE PRI CE CHARGED BY ASSESSEE IS NOT WITHIN THE ARMS LENGTH. HOWEVER, O N A PERUSAL OF THE ORDER DATED 23/05/2013 OF THE TPO PASSED IN PUR SUANCE TO THE DIRECTION OF THE TRIBUNAL, IT IS VERY MUCH CLEAR, T PO HAS EXPRESSED HIS INABILITY IN FINDING A COMPARABLE UNDER CUP MET HOD. IN THESE CIRCUMSTANCES, THERE WAS NO OTHER CHOICE LEFT TO TP O BUT TO ACCEPT THE PRICE CHARGED BY ASSESSEE AS ALP. IN THE AFORES AID VIEW OF THE MATTER, WE HOLD THAT ADJUSTMENT MADE TO ALP IS NOT JUSTIFIED. ACCORDINGLY, WE DELETE THE ADDITION MADE ON THAT AC COUNT. 12. IN VIEW OF OUR DECISION ON THE MAIN GROUND, THE ADDITIONAL GROUND RAISED BY ASSESSEE HAS BECOME INFRUCTUOUS AN D ACCORDINGLY THE SAME IS DISMISSED. 13. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 04/02/2015. (B. RAMAKOTAIAH) (SAKTIJIT DEY) ACCOUNTANT MEMBER JU DICIAL MEMBER HYDERABAD, DATED: 4 TH FEBRUARY, 2015 KV 10 ITA NO. 1427/HYD/2014 TRINITI ADVANCED SOFTWARE LAB PVT. LTD. COPY TO:- 1) TRINITI ADVANCED SOFTWARE LABS. PVT LTD., C/O CH . PARTHASARATHY & CO., 1-1-298/2B/3, 1 ST FLOOR, SOWBHAGYA AVENUE, ST. NO. 1, ASHOKNAGAR, HYDERABAD. 2) ITO, WARD 2(2), HYDERABAD. 3) DRP, HYDERABAD 4) DIT(IT & TP), HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S. 2. DRAFT PLACED BEFORE AUTHOR SR.P.S 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER VP 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S. 6. KEPT FOR PRONOUNCEMENT ON SR.P S. 7. FILE SENT TO THE BENCH CLERK SR.P.S. 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER