ITAT, MUMBAI BENCH “K”
ITA No. 7861/Mum/2011
Assessment Year : 2007- 08
Capgemini India Private Limited
Vs.
Asst. Commissioner of Income tax
Date of Pronouncement : 28.02.2013
O R D E R
PER RAJENDRA SINGH, AM:
This appeal by the assessee is directed against the order dated 14.10.2011 of the AO passed in pursuance of direction of DRP under section 144C(5) of the Income tax Act, 1961. The only dispute raised in the appeal is regarding transfer pricing adjustment made by AO on account of the international transactions.
2. Facts in brief are that the assessee during the assessment year 2007- 08 had provided software programming services to the parent company in the US for which the assessee had received a sum of Rs.5,39,40,81,065/-. Since the assessee had entered into an international transaction with an associate enterprise, the income arising from such transaction in view of the provisions of section 92C has to be computed having regard to arm’s length price. Section 92CA prescribes various methods such as comparable uncontrolled pricing (CUP) method, re-sale pricing method, cost plus method, profit split method and transactional net margin method (TNMM) etc. The AO during the assessment proceedings referred the issue of determination of arm’s length price to the Transfer Pricing Officer (TPO). The TPO, therefore, issued notice under section 92C to the assessee asking the assessee to give details of transfer pricing study conducted by it to compute arm’s length price of the international transaction. The assessee in the transfer pricing study selected TNMM method as the most appropriate method for bench marking the international transaction with respect to uncontrolled transactions. The assessee selected 11 comparables which were engaged in similar line of business and provided services primarily to the US or European market having sufficient public financial and business information. The assessee computed the weighted average margin of these comparable over three years i.e. financial years 2004-05 to 2006-07 at 13.7% as per table below :-
