2016 (9) TMI 1363 - ITAT DELHI

TPA - comparable selection criteria - Held that:- Assessee was engaged in the business of providing high end IT enabled services to its Associated Enterprise. The company was registered with Software technology Park of the Government of India. The assessee conducted research activities and provided knowledge management services to its associated enterprise, thus companies functionally dissimilar with that of assessee need to be rejected from final list of comparable.

Misc. income and misc. expenses treated as operating profits - Held that:- CIT(A) has observed in regard to misc. income that the same pertained to income from other sources and the misc. income was included as part of operating profit in the case of comparable company. Therefore, there could not be any prejudice to revenue on this count. As regards misc. expenses, ld. CIT(A) has observed that the same included a multitude of expenses that were too small in value. But since they pertained to the operations of the company, they were treated as operating expenses for both the tested party as well as the comparable companies. The TP analysis, as we have earlier observed, is not an exact science and we have to arrive at reasonable conclusions which would not materially affect the profit margins. Therefore, we do not find any reason to interfere with the finding of ld. CIT(A)

Considering finance charges for computation of operating profits - Held that:- We find that ld. CIT(A) has observed that finance charges were in the nature of bank charges which pertained to the business operations of a company. He further referred to this observation in regard to working capital adjustment wherein he had held that the interest on loans taken by both the comparables as well as the assessee should be treated as part of operating expense. These findings have not at all been controverted. Therefore, we do not find any reason to interfere with the finding of ld. CIT(A).