TP adjustment rejected as margin determined falls within tolerance limit of +/- 5%: ITAT Mumbai

Facts- The assessee is engaged in the business of providing range of back office support services. It is a captive service provider for its group entities. During the year, assessee had entered into international transactions with its AEs. Assessee has benchmarked the transaction for ITES and IT services by adopting TNMM as Most Appropriate Method. The PLI was net cost plus and computed the operating margin under the BPO/ITES segment at 11.78% and Software/IT segment at 14.87%.

TPO in so far as ITES segment is concerned has rejected all the comparable and selected his own 11 comparable with arithmetic mean of 29.30%. In so far as IT segment is concerned, out of 29 comparable chosen by the assessee, the TPO rejected 24 comparable and accepted only 5 comparable. He further introduced 15 additional comparable and finally worked out arithmetic mean at 27.11% under the IT segment and accordingly, made upward adjustment in both the segments.