Provisions of Arms Length Price u/s 92 of the Income Tax Act

IN THE INCOME TAX APPELLATE TRIBUNAL
“A” BENCH : BANGALORE

BEFORE SHRI N. V. VASUDEVAN, VICE PRESIDENT AND
SHRI B. R. BASKARAN, ACCOUNTANT MEMBER

IT(TP)A No.66/Bang/2017
Assessment Year : 2012-13

M/s. ASM Technologies Ltd.,
No.80/2, Lusanne Court,
Richmond Road,
Bengaluru – 560 025.
PAN : AABCA 4362 P
APPELLANT 

Vs. 

DCIT,
Circle – 1(1)(2),
Bengaluru.
RESPONDENT

Assessee by : Shri. Suresh Muthukrishnan, CA
Revenue by : Ms. Neera Malhotra, CIT(DR)(ITAT), BengaluruO R D E R

Date of hearing : 23.06.2021
Date of Pronouncement : 30.06.2021

O R D E R

Per N. V. Vasudevan, Vice President

This is an appeal by the assessee against the final order of assessment dated 18.11.2016 of the DCIT, Circle –1(1)(2), Bengaluru, passed under section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (hereinafter called ‘the Act’), for Assessment Year 2012-13.

2. The assessee is engaged in the business of providing software development services, manpower supply and training. For Assessment Year 2012-13, the assessee filed the return declaring a total income of Rs.10,21,07,240/-. The assessee entered into transactions with its foreign AE. The transactions with AE were international transactions and in view of the provisions of section 92 of the Act, the Arms Length Price (ALP) in respect of international transaction had to be determined. The assesse filed a Transfer Pricing study in support of its claim that the transactions with AE were at arm’s length. A copy of the transfer pricing analysis by the assessee is at pages 109 to 159 of the assessee’s Paper Book. In the Transfer Price Study (TP study), the assesse had only listed out software development services as an international transaction and justified the price by adopting Comparable U4. The TPO adopted Transaction Net Margin method (TNMM) as the Most Appropriate Method (MAM) as against the claim of the assessee that Comparative Uncontrolled Price Method (CUP) was the MAM. The TPO thereafter chose comparable companies and determined the ALP of the international transactions as follows:

3. The Transfer Pricing Officer (TPO) to whom the determination of ALP was referred by the AO u/s.92CA of the Act, adopted the profit margin of the assessee as follows: 

“12.4 Computation of Arm's Length Price:

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