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2016 (6) TMI 1358 - AT - Income TaxTP Adjustment - comparable selection- TPO accepted TNMM adopted by the assessee-company as well as cost + margin as a profit level indicator but rejected the transfer pricing study report - HELD THAT:- Company functionally dissimilar cannot be compared with a company engaged in rendering of ITeS services. Depending on the skills required to perform ITES the comparability has to be done Co-ordinate bench of Mumbai the case of Symphony Marketing Solutions India Pvt. Ltd. vs. ITO [2014 (2) TMI 83 - ITAT BANGALORE] wherein the Tribunal held that since the company has very low salary cost and outsourced most of its work and therefore, was held to be incomparable. Extraordinary event like merger and de-merger will have an effect on the profitability of the company in the financial year in which such event takes place. Allowability of benefit of tolerance margin - Deduction of +/– 5% under proviso to Sec.92C - HELD THAT:- An Explanation was added to section 92C(2) with retrospective effect from 1/10/2009. This Explanation was considered by IHG IT SERVICES (INDIA) (P.) LTD. [2013 (5) TMI 309 - ITAT DELHI] wherein it was held that the benefit of 5% tolerance margin would be available only if the variation is within the tolerance margin. Once the variation exceeds the tolerance margin, then no benefit of tolerance margin would be available to the assessee. Respectfully following the decision of the Special Bench, we direct the AO/TPO to grant the benefit of tolerance limit of 5% if the variation after passing the consequential order to the Tribunal is less than 5% and accordingly, the issue is restored to the file of the AO.
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