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2017 (4) TMI 1491 - AT - Income TaxTP Adjustment - comparable selection - exclude Twenty Twenty Television Company from the final set of comparables noticing that it has made a loss in this year - HELD THAT:- Pune Bench of the Tribunal in the case of Bobst India (P.) Ltd. [2015 (12) TMI 684 - ITAT PUNE] decided this aspect by examining the financial position of the particular concern over the last three years. The Bench noted that in one of the last three years, the concern was in profits and, therefore, in this background it inferred that such a concern could not be considered as a persistent loss-maker. At the time of hearing, assessee had drawn our attention to a tabulation prepared for three years ending 31.3.2006, 31.3.2007 and 31.3.2008, which shows that in the year ending 31.3.2006, the said concern had made a profit while there was loss in the other two years. In this background, therefore, it could not be said that as on the year ending 31.3.2008, which corresponds to the assessment year before us, such a concern was a persistent loss-maker so as to exclude it from the final set of comparables. Thus, following the ratio of the decision of the Pune Bench of the Tribunal in the case of Bobst India (P.) Ltd. (supra), we deem it fit and proper to direct the TPO/Assessing Officer to include the said concern in the final set of comparables. Correction of margin of one of the concerns included in the final set of comparables, i.e., Creative Eye Ltd. - margin of the said concern has been adopted at 7.33%, whereas the stand of the appellant is that the correct margin of the said concern is 0.47% and that the lower authorities have erred in calculating the margin at 7.33%. - HELD THAT:- As per the tabulation furnished by the assessee as Annexure - B to the written submissions it is clear that in the case of other comparable concerns, the Total Operating Expenses have been calculated after taking into account the Depreciation and Provision of FBT; and, that it is only in the case of Creative Eye Ltd. the same have been excluded. Quite clearly, the determination of margin in the case of all the comparable concerns needs to be uniformly done, so as to impart rationality to the comparability analysis. Having regard to the material on record, we are satisfied that the correct margin of Creative Eye Ltd. is to be taken as 0.47% and that the DRP has unjustifiably rejected the plea of the assessee. As a consequence, we direct the TPO/Assessing Officer to consider the margin of Creative Eye Ltd. at 0.47%, and thereafter rework the determination of arm's length price. Assessee submitted that if the plea for inclusion of Twenty Twenty Television Company Ltd. and the corrected margin of Creative Eye Ltd. is accepted, then, the margin of the resultant comparables would fall within the + 5% of the stated margin of the assessee and the necessity of making any adjustment would be obviated in terms of Sec. 92C(2) of the Act. Since we have accepted the aforesaid two pleas of the assessee, therefore, the other issues raised in the Grounds of appeal with regard to the Content and Support segment are rendered academic and are not being adjudicated for the present. Insofar as the Content and Support segment is concerned, the TPO/Assessing Officer is directed to re-work the arm's length price of the international transactions in accordance with the aforesaid directions. Benchmarking of international transactions in the General Management Support Services segment - HELD THAT:- Exclusion of Access India Advisors Ltd. on the ground that the profit margins of the said concern fluctuate widely and in the instant assessment year itself it is quite high at 45.97%, which goes down to 6.62% in the next year and thereafter there is a negative margin of 74.60%. Similarly, with regard to the earlier three years, the margin levels are quite in variance not only in comparison with the level of margin in the instant assessment year but also in relation to the subsequent two years. Be that as it may, the financial data of the succeeding years, which is essential to examine any abnormal profit trends, was not available to the assessee at the time of carrying out its Transfer Pricing Study and, therefore, once such an information is available in public domain, it is only thereafter that the assessee can feasibly raise such a ground based on the abnormal fluctuations in the margins. Notably, insofar as the instant case is concerned, there is ostensibly a justifiable reason for the assessee to raise such a plea before us, which was hitherto not raised before the lower authorities. Therefore, on this aspect, we admit for consideration the plea of assessee for exclusion of Access India Advisors Ltd. from the final set of comparables. Having admitted the plea of assessee seeking exclusion of Access India Advisors Ltd. from the final set of comparables, and for the reason that such a plea was hitherto not before the lower authorities, we deem it fit and proper to remand the matter back to the file of Assessing Officer/TPO for an appropriate verification. AO/TPO shall verify the working of the Operating margins of Access India Advisors Ltd. furnished by the assessee for the various years and if it is found to be volatile without reflecting any normal business condition, then, the Assessing Officer/TPO shall exclude the same from the final set of comparables. Segment of Provision of General management and support services is to seek inclusion of Educational Consultants (India) Ltd. - HELD THAT:- The said concern has been accepted as a comparable even in the assessments finalised u/s 143(3) of the Act. Be that as it may, it is also clearly emerging from the order of TPO that the said concern has been excluded by merely making a bald assertion about the dissimilarity of functions. Notably, such an observation of the TPO is devoid of any factual support and, in our view, it was imperative for the TPO to bring out the distinguishing features considering that the said concern was taken as a comparable in the past years. Such a burden has clearly not been discharged by the TPO as is evident from the discussion in the order and, therefore, we find no reason to uphold his stand for excluding the said concern from the final set of comparables. Therefore, on this aspect also, assessee succeeds. Basis for working out the risk adjustment - Case of assessee for adjustment on account of difference in working capital and risks assumed has been shut out even before examining the same in some detail. HELD THAT:- Before us, the learned representative has furnished the workings of working capital adjustment and risk adjusted margin of the comparable concerns to point out that on facts also, such adjustments are justified. Even otherwise, we find that our coordinate benches in the case of Intellinet Technologies India (P.) Ltd. [2012 (6) TMI 237 - ITAT BANGALORE] and Schlumberger Global Support Centre Ltd [2015 (10) TMI 2625 - ITAT PUNE] have found that even in the course of comparability analysis carried out by applying the TNM method, suitable risk adjustments are permissible if the facts of the case so warrant. O Workings referred by the assessee before us culling out justification for allowing working capital and risk adjustments have not been verified by the lower authorities. Therefore, while we uphold the stand of the assessee in-principle, so however, it would be imperative for the assessee to factually demonstrate the justifiability of the adjustments on account of difference in working capital and risks assumed vis-a-vis the comparables before the lower authorities. Therefore, the matter is set- aside to the file of TPO/Assessing Officer with directions to consider the plea of the assessee in accordance with law. Thus, on this aspect, assessee succeeds for statistical purposes. Addition of non-reconciliation of ITS data - HELD THAT:- Onus is on the assessee to reconcile the details, so however, the reconciliation is to be based on availability of appropriate details. At the time of hearing, the assessee-company had referred to a communication dated 12.12.2011 addressed to the Assessing Officer which succinctly details the reasons for the difference and the reason for which proper reconciliation could not be made. In the said communication, assessee had explained that the ITS details was founded on the basis of name and address of the parties and the amount and date entered by the other party in its book of accounts. It has been pointed out that in the absence of PAN of other party, the relevant invoice number and date, it is difficult to exactly match the entries appearing in the assessee's book of accounts. The relevance of the aforesaid has also been brought out in some detail by the assessee in its communication to the Assessing Officer. One pertinent point which stands out is the assertion of the assessee before the Assessing Officer that wherever in case of a party the amount of revenue recorded in the Profit & Loss Account of the assessee was found lower than the ITS details, assessee explained that same is merely on account of timing difference inasmuch as assessee would have credited such sum to the Profit & Loss Account of the other year. Assessee also asserted before the Assessing Officer in its communication dated 12.12.2011 that in respect of the parties mentioned in the ITS details, on an overall basis, the revenues reflected by the assessee in its financial statements was higher than the revenues noted in the ITS details. There is no repudiation to any of the aforesaid assertions and, therefore, we find that no addition is warranted on this count. Therefore, on this aspect, assessee succeeds. Grant of credit for TDS - HELD THAT:- As assessee submitted that assessee had already moved an application to the Assessing Officer seeking credit for the TDS. Considering the aforesaid, we direct the Assessing Officer to consider the application of the assessee in accordance with law. Thus, on this aspect, assessee succeeds for statistical purposes
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