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2011 (2) TMI 1294 - AT - Income TaxDetermining ALP for International Transaction u/s 92C - Filter for rejection of comparable companies - Assessee-company is an Indian company and almost the entire share capital of it is owned by International LLC - An addition was made in the present case on account of variation in income as a consequence of the order of TPO u/s 92C(3) HELD THAT:- Applying the filter for rejection of comparable companies having related party transactions as a percentage of sales more than 15 per cent., we uphold the said filter. Another filter of rejecting the comparables whose current year financial data is not available, we find that the said filter has been upheld by the DRP by following the decision in CUSTOMER SERVICES INDIA (P.) LTD. VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-17(1), NEW DELHI [2009 (3) TMI 637 - ITAT DELHI,therefore, the second filter is also upheld. Regarding third filter, ratio adopted to filter the comparables is reasonable. However, regarding calculations made while applying this filter with respect to parties in question, as claimed by the assessee that their ratio also falls between 30 to 60 percent, we, therefore, hold that if the wage/sale ratio of the parties, fall within the range of 30 per cent. to 60 per cent., then those parties should be included in the list of comparables to compute the mean margin. We consider it just and proper to restore this issue to the file of the DRP to verify the claim of the assessee. Selection of Companies as comparables - M/s. Space Computer and Systems Ltd. - As per assessee, TPO has wrongly been excluded simply on the ground that it was the first year of operation of the comparable. DRP will verify such fact and after verifying a specific finding should be recorded in this regard and appropriate relief should be given to the assessee Infosys Technologies Ltd., Kals Information System Ltd., Visualsoft Tech Ltd. and Wipro Ltd., particularly, Infosys Technologies Ltd. and Wipro Ltd., - They cannot be excluded as the assessee itself has taken those parties as comparables and now the assessee cannot plead their exclusion simply for the reason that their results are going against the assessee. Cotton Textiles Export Promotion Council and Export Promotion Council for Handicrafts - As per TPO a business enterprise whose basis of existence is profit making, can't be compared to a non-profit organisation. The assessee has not brought any material on record to controvert such findings of fact recorded by the TPO. Hence, the exclusion of such party from the list of comparable is also upheld. IL & FS Academy for Insurance & Finance - This company is engaged in providing training in the form of insurance and finance. Therefore, the result of such company are also not comparable with the results of the assessee. The AR has not submitted any material to controvert these factual finding recorded by the TPO. We decline to interfere and TPO's calculation is upheld However, it is held that if such calculation of the assessee falls within +/- 5%. margin benefit, the said issue may be considered by the DRP as the matter is being restored to the Dispute Resolution Panel on the software development segment. The learned Dispute Resolution Panel has not given any specific finding on this issue that whether or not the assessee is entitled for +/- 5%. benefit to the marketing support service segment.
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