iMedX Information Services (P.) Ltd. v. ITO

INCOME TAX ACT, 1961

--Transfer pricing--Computation of ALPCUP vis-a-vis TNM method----Where assessee and Ckar India were both in same line of business and co-ordinate Bench in Asstt. CIT v. Ckar Systems (P.) Ltd. (2013) 55 SOT 553 (Hyd.-Trib.) had upheld CIT(A)'s order that CUP method was the most appropriate method of computing ALP for international transaction entered into by assessee with its AE, in such a case CUP method was to be adopted.--Assessee was engaged in business of providing medical transcription services and allied software development and support services to AEs. Assessee in its TP study adopted CUP method relying on seventeen Indian companies which provided medical transcription services. For transaction of software development services, assessee had used TNM method selecting ten comparables. TPO did not agree with CUP method adopted for its ITES business opining that since assessee was also involved in development of software for the purpose of medical transcription, entire activity of assessee had to be aggregated and to be considered as ITES only and applied TNM method. He, selecting 13 comparables from ITES segment determined ALP and arrived at TP adjustment. After draft asessment order assessee filed objection before DRP which were rejected. Held: Assessee and Ckar India were in the same line of business i.e., medical transcription services and Co-ordinate Bench in Asstt. CIT v. Ckar System (P.) Ltd. (2013) 55 SOT 553 (Hyd.-Trib.) had upheld the CIT(A)'s order that CUP method was the most appropriate method for computing ALP for the international transactions entered into by assessee with its AE in that case. Since the facts were similar, TPO should have adopted CUP method only for analysing the assessee's International transactions. Upholding assessee's objections AO/TPO was directed to re-do the exercise afresh and determine ALP accordingly.