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2015 (6) TMI 677 - AT - Income TaxTransfer pricing adjustment - ALP - selection of comparables - Held that:- We are in agreement with the submissions made by the assessee that the aforesaid comparables i.e. Maple Esolutions Ltd. cannot be selected for the purpose of benchmarking in the case of the assessee while applying TNMM method.. The TPO failed to appreciate that the aforesaid comparable company and the assessee are engaged in different businesses altogether. As the business model of voice based companies is of totally different nature than that of non voice based companies, we have no option but to exclude the comparable Maple E-solutions Ltd. for the purpose of benchmarking.. It is pertinent to mention here that the aforesaid comparable company was also involved in fraud and the business reputation came under serious indictment. As regards Indusind Information Technological Limited, it is the case of the assessee that the business model of the comparable chosen by the TPO is that of software development unlike that of the assessee company which is engaged in the business of BPO services. The aforesaid comparable may be excluded for the purpose of benchmarking the arm’s length price of the international transactions entered into by the assessee. The software development company has a completely different functional profile as compared to a company engaged in BPO services. The risk undertaken and the assets employed by a software development company cannot be compared to a BPO company. The approach of the TPO by selecting the band of PLI between 10% and 50% is completely arbitrary and has no basis for reasons stated above. The selection of comparables by the TPO has led to arbitrariness wherein the loss making companies are excluded and comparables only in the range of 10% to 50% are selected. The benchmarking made by the TPO is not as per the principles governing Indian Transfer Pricing guidelines regulations or even the OECD guidelines.In view thereof the matter is restored to the file of the AO for making fresh search of comparables in view of the position of law enunciated in the present decision. - Decided in favour of assessee statistical purposes.
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