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2016 (1) TMI 1402 - AT - Income TaxTPO - Comparable selection - rejection of comparables by the TPO merely on the ground that the comparable companies have incurred losses - Held that:- Commissioner of Income Tax (Appeals) has erred in upholding the findings of the TPO in rejecting the Astro Bio Systems Limited, Maars Software International Limited and Megasoft Ltd. only on the ground that the said companies have incurred losses in the comparable year or in the year under consideration. We are of the considered view that the aforesaid three companies should not have been excluded from the list of comparables for arriving at ALP in relation to international transactions. We remit this issue back to the file of Assessing Officer to include the above mentioned three companies in the list of comparable entities and thereafter work out the weighted average mean of the comparables. This ground of appeal of the assessee is accordingly accepted. Cherry picking of high margin companies - TPO in the final list of comparable has retained M/s. V M F Soft Tech Ltd. which is having profit margin of 35.70%. On the one hand the TPO has rejected loss making companies and on the other hand he has retained a comparable having super profits. The TPO should either have rejected both the comparables or included both the extreme comparable in the list of comparables. Since, we have directed the Assessing Officer to include the loss making companies in the list of comparables, M/s. V M F Soft Tech Ltd. can be retained in the same list, accordingly, this ground of appeal of the assessee is rejected. Inclusion of Compucom Software Ltd. in the final list of comparables - TPO applied RPT filter of 25% to reject companies having substantial related party transactions - Held that:- The Tribunal in the subsequent assessment year 2007-08 has excluded Compucom Software Ltd. from the list of comparables as it is having related party transactions in excess of 25%. We are of the considered view that the authorities below have erred in not considering the details furnished by the assessee with respect to the related party transactions of Compucom Software Ltd. furnished by the assessee. We deem it appropriate to remit this issue back to the file of Assessing Officer and decide this issue afresh in the light of the order of Tribunal in assessee’s own case for the assessment years 2006-07 and 2007-08. Accordingly, this ground of appeal is allowed for statistical purpose.
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