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2014 (8) TMI 106 - ITAT MUMBAIRejection of comparables and selection of fresh comparables - Rejection of economic and comparability analysis - Rejection of Business Activity profile - Comparables selected by Assessing Officer/TPO - The assessee is a wholly owned subsdiary of Tecnimont ICB Pvt. Ltd. and engaged in the execution of computer software and information technology enabled services, engineering design under the software development park scheme of Govt. of India - the TPO has not undertaken the exercise of comparing the actual functions and business profile of the assessee with the comparables selected by the assessee but the rejection of the comparables selected by the assessee is based only on the ground of BPO and KPO services – Relying upon Maersk Global Centres (India) (P.) Ltd. Versus Assistant Commissioner of Income-tax [2014 (3) TMI 891 - ITAT MUMBAI] - the classification of Information Technology Enabled Services (ITES) into low-end BPO services and high-end KPO services for comparability analysis is not just and proper, and, therefore, the action of the TPO in rejecting the comparables by applying the criteria of BPO and KPO is not sustainable. The assessee has used the segmental data for determining the arm's length price and taken the mean profit of each comparable only from the segmental data/results - the objection of using multiple year data ceased to exist - once the criteria adopted by the TPO for rejecting the comparable of the set of companies selected by the assessee is not found proper then the comparability has to be analysed on the basis of real nature of the business activities of the assessee as well as the comparables and further where the segmental data are used then the only business activity of the particular segment of comparable has to be compared with the business activity of the assessee. The business profile of the six comparables selected by the assessee and particularity the segment of engineering design services are similar to that of the assessee's services provided to the AEs, therefore, when the International transaction of the assessee company in respect of the services provided to the AEs are similar to the business profile of the comparables and a particular segment of the comparable then the rejection of the comparables selected by the assessee is not proper and justified. Margin of comparable companies as documented in the transfer pricing study of EDTICB plus the companies adopted by the learned TPO – Held that:- The assessee also filed the computation which shows that the assessee's operating profit by using PLI as OP/OC from the international transaction is 24.17% which is more than the arithmetic mean/ALP based on the set of eleven comparables including the assessee's as well as the TPO's selected companies - even after accepting the comparable companies selected by the assessee, the TPO has power u/s 92 CA(3) to gather and consider all relevant materials and information apart from the evidence, information and documents provided by assessee as required under section 92 D(3) of Income-tax Act to determine the ALP in relation to the international transaction - under the provisions of transfer pricing the TPO is not precluded from carrying out fresh search for gathering more relevant information for the purpose of determining the ALP - large size of comparable would give better and adequate representation of uncontrolled price in turn a proper and more realistic price can be determined to compare with the price of international transaction - assessee's international transactions are at arm's length and, therefore, no adjustment is called for – Decided partly in favour of Assessee.
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