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2015 (11) TMI 1563 - AT - Income TaxTransfer pricing adjustment - determination of ALP - selection of comparable - A.R. contended that the TPO/ DRP has arbitrarily rejected the functionally comparable companies namely Steewards Lloyed India Ltd. for TP. - Held that:- TPO has rejected the companies on the sole ground that these companies fall in service filter and has service income to sales income ratio of less than 75% whereas a bare perusal of the audited financial statement of the company for the year ending 31.03.2004 lying at page 48 of appeal set goes to prove that this company has service income to sale is more than 75% i.e. 93.82%; hence arbitrarily rejected by the TPO/ DRP. So, M/s. Steewards Lloyed India Ltd. qualifies for adoption as comparable for transfer pricing. Denial of adjustment of complete utilization as well as risk adjustment while working on average matching of comparables - Held that:- Bare perusal of the findings returned by TPO/DRP reproduced above denying the benefit of capital utilization adjustment and risk adjustment goes to prove that the objection raised by the tax payer having been mechanically disposed off without returning the specific findings as to how and under what circumstances, the data brought on record is not reliable or robust. TPO/DRP has neither declared the data brought on record by the taxpayer as unreliable nor they have injected fresh data to assess the capital utilization adjustment and risk adjustment as claimed by the taxpayer. A perusal of the discussion made by DRP regarding disallowance of utilization adjustment and risk adjustment in para 8.2.6 further goes to prove that merely academic reasons have been given to disallow the same. Case law relied upon by the DRP is not applicable to the facts and circumstances of the case when examined in the light of data brought on record by the taxpayer to decide the issue in controversy. So, findings of DRP/TPO on this issue are liable to be reversed. Consequently, Ground No.2 read with Ground No.1.6 are determined in favour of the appellant for statistical purposes and the file is ordered to be restored to the TPO to decide the matter afresh by passing speaking order after providing opportunity of being heard to the parties.
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