2018 (7) TMI 1862 - AT - Income Tax

TPA - Comparable selection - Held that:- Assessee rendered software development (technical support) to its AEs - Held that:- The decisions cited by the learned DR before us cannot be the basis to hold that high turnover is not relevant criteria for deciding on comparability of companies in determination of ALP under the Transfer Pricing regulations under the Act. For the reasons given above, we uphold the order of the CIT(A) on the issue of application of turnover filter and his action in excluding companies by following the ratio laid down in the case of Genisys Integrating (2011 (8) TMI 952 - ITAT BANGALORE).

Assessee is engaged in the business of providing software development (technical support) services and marketing support services to its overseas Associated Enterprises ('AE'). Being a captive service provider, the Assessee assumes less than normal risks and all significant business and entrepreneurial risks are borne by the AEs thus companies functionally deselected from final list. with that of assessee need to be deselected from final list.

As uncontroverted fact regarding another company amalgamating with this company and consequent abnormal profit of this company, company was rightly directed to be excluded by the CIT(A). We find no grounds to interfere with the order of CIT(A) in this regard.

TPO/AO is directed to compute the ALP on the basis of directions given above and if the Assessee is found eligible for the benefit of tolerance limit as per the second proviso to Sec.92CA(2) of the Act, allow the said benefit and compute ALP.