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2014 (4) TMI 932 - AT - Income TaxDeletion of adjustment u/s 92CA(3) of the Act – Selection of comparables – Held tha:- While finalising the ALP,TPO had added two new comparables i.e. FEL and MIL to the eight comparables adopted by the assessee, that because of the inclusion of the two companies variation in operating margin arose, that the operating margin was within the range of 5% of the arithmetic mean of the operating margin of the comparable companies – the TPO had not given any reason as to why he was including FEL and MEL in the list of comparables - He did not give any notice to the assessee for inclusion of two new variables. Basic principles of natural justice demand and expect that assessees should be heard, before fastening tax-liability to them - It is not known as how did the TPO arrive at the conclusion that FEL and MEL could be compared with the other companies for arriving at operating margin. Similarly, it is also not known as whether both the companies were in the same line of business or not. If the TPO had some definite information, he should have brought it on record and should have confronted the assessee with it - It would have given a chance to the assessee to defend itself - By not affording an opportunity to the assessee, TPO had taken a unilateral decision and such decisions cannot be endorsed - TPO had not found any defect in TP Study carried out by the assessee - TPO had not discussed the reason for not accepting the operating margins of AIL, though the said company was in the same business - If the average operating margin shown by the assessee is compared with AIL, it is clear that same was within the +/-5% of the margins/transactions and was allowable as per the rules - while considering the basic data of AIL had ignored vital factors that have been highlighted by the FAA - FAA had correctly held that international transactions entered in to by the assessee were at arm's length and that no adjustment was required – Decided against Revenue.
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