Indian Kanoon - Search engine for Indian Law

5. The appellant being a contract service provider to its US based parent company, bills its parent company at a total cost plus of 11%, which is based on the commercial character of the transaction of service it delivers to its AE. Assessee conducted a transfer pricing study by an independent external professional (BSR & Co.), their report is based on appropriate industry scenario and the compliance of Arm's Length Pricing (ALP) by the appellant.

6. During the course of the assessment proceedings, ld TPO objected to the ALP worked out on the Profit Split Method (PSM) and proposed to apply Transactional Net Margin Method (TNMM) and was asked to provide the justification of ALP. The appellant in its reply dated 18th January, 2010 provided the consolidated financials and the justification of the ALP adopted by it. Ignoring the same ld. TPO erred in ignoring the appellant' appropriate method and adopting Transactional Net Margin Method without valid reasons.