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2019 (9) TMI 1059 - ITAT BANGALORETP Adjustment - comparability of companies - HELD THAT:- Companies functionally dissimilar with that of assessee and extraordinary events that occurred during the relevant previous year which had impact on the profit margin of this company and not satisfying employee cost filter need to be deselected from final list. Not treating provision for doubtful debts, provision for warranty - HELD THAT:- Under the scheme of income tax act mentioned in chapter 10 a LP is required to be determined of the tested party by comparing price percentage charged by the assessee whiz comparable in respect of international transactions entered by the assessee with its AE. If the bad debts, provisions of warranty, doubtful interest, miscellaneous expenditures are taken for earlier years then formula for calculating the profit percentage would be disturbed, as only current year’s turnover with the corresponding operating revenue are operating expenses are required to be considered. By allowing this to be considered for the purpose of determining ALP, distorted results will arise, there will be change in numerator without corresponding changes in the denominator i.e., bad debts etc., would be taken into account without taking into account the turnover of the earlier years. Further our view is also supported by the fact that ALP is to be determined with reference to the international transaction entered for the year under consideration. However the details of the various heads namely bad debts doubtful debts etc., are not available which are restricted to the year under consideration, as consolidated figures are available on record - ground remanded back to the file of the TPO/AO for granting bad debts, doubtful debts et cetera as permissible expenses, if the same appertaining to be under consideration
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