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2012 (5) TMI 414 - AT - Income TaxTransfer pricing - arm's length price - Order of DRP u/s 144C - selection of comparable - According to the assessee, it is a small public limited company and cannot be compared with the companies whose turnover is large - held that:- neither the assessee in its TP report nor the TPO in the TP order have spelt out the functions performed, risk borne and assets used by the assessee as well as associated enterprises. Function and risk assessment has not been performed between the assessee and the comparable companies. Any difference in the function and risk which will affect profitability ought to be identified and adjustment made to arrive at the ALP. Without analysis of the above, we are of the view that the choice of comparable companies itself would become questionable. Overall profitability cannot be taken as a yardstick but if transactions or set of transactions undertaken by the assessee and the comparable companies are substantially the same, there can be no objection to applying the overall profitability. However proper adjustments have to be made to the margin arrived at by the AO for any differences at transaction level between the transaction of the assessee and that of the comparable companies. Appeal allowed by way of remand.
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