Geographical location of market is of no consequence in judging comparability of an uncontrolled transaction under CUP method, unless market condition in which uncontrolled transactions have taken place are materially different. 

Facts of the Case:

• Assessee, a telecommunication provider, provided its customers facilities for making calls to and receiving calls from the overseas subscribers.
• When a customer of the assessee makes the call abroad, the assessee’s network carries the call till the shores of India, and, thereafter, call is transferred to the overseas operator and vice-versa. The services so rendered by the assessee are referred to as carriage and termination of calls for voice traffic.
• The appellant had entered into several arrangements with respect to these services with various overseas operators. One such arrangement was with an AE in Singapore.
• The TPO, for the purpose of CUP analysis, held that the rate charged to the AE should be compared with non-AE in the same market or the geographically nearest market.
• Therefore, the TPO concluded that the rates charged to AE should be compared with the rates charged to an unrelated Malaysian company, and that all other cases of Europeand USA based telecommunication operators should be rejected for CUP analysis.

Held for the case:

• Geographical location of the market is of no consequence in judging comparability of an uncontrolled transaction for the purpose of applying CUP method, unless market condition in which uncontrolled transactions have taken place are materially different.
• Merely because markets of uncontrolled transactions and controlled transactions are at different locations, irrespective of the geographical distance between the markets, the transactions in such markets do not cease to be good comparables for determining the arm’s length price under the CUP method.
• Though end consumer of an international call being made to India could be in Singapore, Malaysia, Brazil, US or anywhere else outside India, yet the international transaction by the assessee is a business to business service with respect to Indian market.
• The origin of the call does not make any difference to the activity performed by the assessee. Therefore, there cannot be any difference in the market conditions in such a case merely because the international call originates from different countries.
• Therefore, the Tribunal deleted the impugned ALP adjustment in respect of sale of ‘carriage and termination of voice traffic’.

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