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2016 (8) TMI 1222 - AT - Income TaxTPO - comparability - Held that:- Broad comparability of a fairly large number of comparable companies can further ensure that minor variations if any are offset by taking a fairly large sample. Any major impact of their FAR on their net profitability if still so warranted on facts can be addressed by carrying out appropriate adjustments the need for which has to be demonstrated on the basis of record so as to bring their FAR in alignment with that of the tested party i.e. the assessee. The Rules moreover permit adjustments in the comparables selected if it can be demonstrated that these would impact the profitability of the comparable selected. Thus before considering the comparables the FAR analysis on the basis of the functions performed assets available and risks assumed need to be analyzed in detail if need be to the level of hair splitting which the tax payers attempt for the comparables. Thereafter the selection of comparables is an exercise which would be hugely facilitated and relatively free from the need to address micro variations. Accordingly, the issue is restored to the file of the TPO to carry out this exercise and pass a speaking order in accordance with law. Needless to say that the assessee shall be afforded a reasonable opportunity of being heard.
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