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2016 (10) TMI 1138 - AT - Income TaxTPA - comparable selection criteria - DRP approving selection of TPO of Thirdware Solutions as good comparable - Held that:- Assessee is engaged in software development valuation of production works of computer software and operates mainly on the instructions of its associate enterprises whereas the impugned comparable Thirdware Solution is additionally also in the business of trading of software outsources it activities. We are, therefore, of the view that Thirdware Solution is not a fit comparable in the case of assessee for the purpose of making T.P. adjustment. We allow this ground of assessee. Validity of adjustment u/s 144C - DRP has not directed to make any adjustment to the income - Held that:- From going through the order of ld. DRP and submissions of ld. AR that M/s E-Infochips Bangalore Ltd. which was comparable taken by TPO was directed to be deleted by ld. DRP. Also in the case of Kuliza Technologies the comparable selected by TPO, ld.DRP observed that the operating profit margin of Kuliza Technologies needs to be given effect after treating the claim of bad debts as regular business expenditure and to exclude other income including interest, amount written off and miscellaneous income being non-operative income so as to arrive at the correct operating profit. From going through the order of ld. Assessing Officer u/s 143(3) r.w.s. 144(C) of the Act we observe that no such effect has been to the above said observations of ld. DRP. Further in lieu of our decision for not considering Thirdware Solution Ltd. as a comparable to arrive at the arms length price of the international transaction entered into by the assessee. We are, therefore, of the view that the order u/s 143(3) r.w.s. 144(C) of the Act needs to be set aside and we direct ld. Assessing Officer to frame a fresh order u/s 143(3) r.w.s. 144(C) of the Act after giving due effect to our observations made by us in the preceding paragraphs. Needless to mention that proper opportunity of being heard should be given to the assessee. Accordingly this ground of the assessee is allowed for statistical purposes.
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