Sec. 92C of Income Tax Act, 1961—Transfer Pricing—Foreign AEs are least complex entity therefore foreign AEs should be treated as tested parties.

Facts: Whether CIT(A) was justified in accepting the contention of assessee, that foreign AEs can be considered as the tested party by establishing arm’s length price?

Held, that the selection of the tested party depends on the comparative evaluation of the functions performed, assets employed and risks assumed ("FAR profile") by the parties involved in an international transaction. The entity which is the least complex based on the evaluation is adopted as the 'tested party .TPO stated that subsidiaries act primarily as marketing arm of the assessee and perform administrative services. It is the assessee which is entrusted with the task of performing the non-administrative, core and essential services. Therefore, TPO has himself accepted that assessee is more complex entity and foreign AEs are least complex entity. Considering the factual position narrated above, it is abundantly clear that foreign AEs are least complex entity therefore foreign AEs should be treated as tested parties. That being so, we decline to interfere with the order of C.I T.(A) in treating foreign AEs as tested party. His order on this issue is, therefore, upheld and the grounds of appeal of the Revenue are dismissed. - ASSTT. CIT V/s ITO INFOTECH INDIA LTD. - [2020] 182 ITD 101 (ITAT-KOLKATA)