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2019 (8) TMI 1725 - AT - Income TaxTP Adjustment - comparable selection - functional similarity - HELD THAT:- R. Systems International Ltd comparable has been rejected only on the ground that it follows different accounting period and learned DRP has observed that such comparable has to be excluded as the result cannot be compared with degree of accuracy as quarterly audited results are not available. Now it is the contention of learned counsel that the details required in this case pertaining to 1.4.2013 to 31.3.2014 are now available and these data can be used and result can be extrapolated. The case laws referred by learned counsel in this regard also support the proposition that this comparable can be accepted as comparable on the facts of this case - we accede to the request of learned counsel to remand back the issue to the TPO to include R. Systems International Ltd. in the final list of comparables and consider in the light of now available quarterly results from 1.4.2013 to 31.3.2014. Excel Infoways Ltd - We find ourselves in agreement with the submission of learned Counsel of the assessee. As evident from the submissions, the said comparable has hugely fluctuating margin also. Its revenue is declining in to a great extent. Furthermore, assessee’s plea is that the comparable has unreliable employees cost. That there is no separate segment for ITeS. That the company has diversified into new areas such as construction and development of property. These distinguishing features show that this entity is not a good comparable in the present case. This proposition is also supported by the case laws referred by learned counsel as above. As regards the issue of corporate support services, we accede to the request of the learned Counsel of the assessee and direct that R. Systems International Ltd. be included as comparable in terms of our direction as above and Excel Infoways Ltd. should be rejected. Transfer pricing adjustment in respect of research and development of the assessee has confined the argument that the assessee’s grievance will be addressed by excluding selection of Syngene International Ltd. as comparable. It is the claim of the assessee that Syngene International Ltd. is engaged in different business activity. That it is engaged in contract research and manufacturing services. That its segmental information is not available. Hence, results of research and manufacturing activities cannot be separately identified and compared. Learned counsel has also placed reliance upon the case laws where it has been agreed that in the absence of segmental analysis, this is not a good comparable. Accordingly, we accept the contention of learned counsel and direct that Syngene International Ltd. should be taken out of comparable. The TPO shall make computation afresh accordingly after giving the assessee proper opportunity of being heard.
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