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2022 (5) TMI 1612 - AT - Income TaxTP Adjustment - comparables selected by the assessee and erroneous margin computation in case of some other comparables - HELD THAT:- Killick Agencies & Marketing Ltd. company is more or less into earning commission income being an agent of certain overseas entities specialized in manufacturing and sale of dredgers, dredging equipments, rudder propellers etc. Whereas, assessee provides sales and support services including warranty and maintenance services. Therefore, due to significant differences in the functional profile of the assessee and the selected comparable, we hold that this company cannot be treated as comparable to the assessee. Accordingly, AO is directed to exclude this company from the list of comparables. Febulka Advertising Pvt. Ltd be excluded due to insufficient information available in public domain regarding the financials of the company as audited annual report of the company is not available in public domain. Info Edge India Ltd company is providing internet based services relating to recruitment, matrimony and education etc. Whereas, the assessee provides sales and post sales support services to the products sold by its AE. Considering the huge difference in the functional profile between this comparable and the assessee, it will fail the functionality test, hence, cannot be considered as a valid comparable. Interactive Manpower Solution company provides offshore recruitment and staffing solutions. These activities of the company certainly cannot be compared to the sales and post sales services provided by the assessee. It is also observed that the company has reported huge increase in its profit margin. Therefore, without properly analyzing the factors leading to abnormal increase in profit margin, it would not be safe to include this company as a comparable. In any case of the matter, fact remains that the company is functionally dissimilar to the assessee. For this reason alone, it cannot be included as comparable. Sasken Network Engineering Ltd., Himachal Futuristic Communications Ltd. and Cameo Corporate Services Ltd. - as argued TPO has incorrectly computed the margin of these comparables by disregarding the working given by the assessee - HELD THAT:- We direct the assessing officer to examine the working of margin computation of the comparables stated to have been furnished by the assessee and correctly compute the margin of these three comparables after providing due opportunity of being heard to the assessee. TP adjustment made to the ALP of payment made to the AE towards availing of management services - HELD THAT:- When the issue ultimately came up for consideration before the Tribunal [2018 (8) TMI 126 - ITAT DELHI], the Tribunal restored the matter back to the assessing officer - we are of the considered view that this issue also needs fresh adjudication. We, accordingly, restore this issue to the file of the TPO. The TPO is directed to decide the issue afresh after considering the detailed submissions/documentary evidences furnished by the assessee. The assessee is directed to furnish the details of services utilised. Disallowance of deduction claimed u/s 10AA - while the assessing officer has disallowed assessee's claim of deduction u/s 10AA on the reasoning that assessee failed to furnish the complete details called for, learned DRP upheld the disallowance by relying upon its decision in assessment year 2015-16 - HELD THAT:- Undisputedly, the fact whether the assessee had fulfilled the conditions of Section 10AA of the Act was never decided by the Tribunal, since, the appeal of the assessee was decided on a legal ground and the assessment order was quashed. Therefore, the allegation of the departmental authorities that the SEZ unit is nothing but an extension of the existing unit, by splitting up or even otherwise, requires to be examined. More so, when the Assessing Officer has alleged that assessee failed to furnish the complete details. The contention of learned counsel for the assessee that the fulfillment of conditions of section 10AA of the Act cannot be examined in this assessment year, as, assessee's claim was allowed in assessment year 2015-16, the initial year of claim, in our view, is unacceptable. This is so because, in assessment year 2015-16 the departmental authorities, no doubt, had rejected assessee's claim of deduction due to alleged non-fulfillment of conditions of section 10AA of the Act. The issue was never examined by the Tribunal on merits while deciding assessee's appeal for assessment year 2015-16. Therefore, it cannot be said that fulfillment of conditions of Section 10AA of the Act was examined in assessment year 2015-16. Since, AO has alleged that the assessee has failed to furnish complete details/information to evaluate the fulfillment of conditions of eligibility of claim of section 10AA and since learned DRP has simply relied upon its own decision in assessment year 2015-16 without verifying the facts, we are inclined to restore the issue to the assessing officer for fresh adjudication after verifying the fact whether the assessee has fulfilled the conditions of section 10AA. This ground of appeal is allowed for statistical purposes.
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