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2016 (4) TMI 1176 - AT - Income TaxTP adjustment - whether the TPO has erred in not considering correct OP/TC margin of M/s. M.N. Dastur & Company (P.) Ltd. of 0.18% and thereafter failed to comply with the directions issued by the ld. DRP? - Held that:- Undisputedly, during the rectification proceedings filed before TPO u/s 144 by the assessee, correct computation of OP/TC method of M/s. M.N. Dastur & Co. Pvt. Ltd. of 0.18% was filed which was verified by the TPO and has not disputed the same in any manner. At the same time, the AO has also allowed to perpetuate the error committed by the TPO in considering the OP/TC margin of M/s. M.N. Dastur & Co. Pvt. Ltd. by recording its OP/TC margin at 8.46% instead of actual OP/TC margin of 0.18%. So, we are of the considered view that the matter is required to be restored to the TPO to decide the matter afresh by taking actual margin of OP/TC by M/s. M.N. Dastur & Co. Pvt. Ltd. and then to compute the adjustment of transfer pricing. Consequently, ground determined in favour of the assessee. Including functionally dissimilar companies as comparable - Held that:- From the given guidelines it can be seen that unless it is shown that how the risk adjustment would change the result of each comparable and how the same would improve the comparability and unless adequate reasons are given for such adjustment, no adjustment can be allowed to the taxpayer. In the present case except pointing out various risks the taxpayer has not shown with evidence as to whether each of the risk was actually undertaken by the comparables or not and if so how these risks affected each of them and whether such adjustment would improve the comparability It may also be mentioned that it is incorrect to say that the taxpayer is working Virtually in a risk free environment. As mentioned above the taxpayer too bears several risks like technology risk, foreign exchange risk, manpower risk, etc. No doubt, the assessee company has claimed risk adjustment during TP proceedings for benchmarking with the comparable companies but the detail of the risk adjustment sought for by the assessee is not available on the file. So, we are of the considered view that assessee is to provide the details of the risk adjustment sought for and in case, it comes within + / - 5% then no such benefit is to be given. Otherwise, TPO is directed to decide the matter afresh after providing an opportunity of being heard. - Decided in favour of assessee for statistical purposes
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