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2016 (6) TMI 589 - AT - Income TaxAddition on account of transfer pricing adjustment - selection of comparable - Held that:- Airline Financial Support Services (I) Ltd. - As find from the Annual report of this company, which is available on page 107 onwards of the paper book, that as against its gross revenue from service fees amounting to ₹ 29.32 crore, there is receipt of revenue from its associated enterprises to the tune of ₹ 9.31 crore. This shows that the percentage of RPT is 32% (approx.), thereby failing the RPT filter of 25% as held in several cases discussed above. In view of the fact that the RPTs of this company are more than 25%, it becomes a controlled transaction and disqualifies from being considered as a comparable uncontrolled transaction, so as to find a place in the list of comparables. Ergo, we uphold the action of the ld. CIT(A) in excluding Airline Financial Support Services (I) Ltd. from the list of comparables. CS Software Enterprises Ltd. and Spanco Telesystems and Solutions Ltd. - Held that:- When we compute the percentage of Personnel cost to Total cost on the basis of these two figures, there emerges figure of 45%. If we go ahead with the correct ratio of the assessee’s Personnel cost to total cost at 45%, even the filter applied by the TPO between 48% to 53.5% becomes erroneous because that was based on the TPO’s calculation of the assessee’s ratio of Personnel expenses to total expenses at 52.11%, which itself is wanting. Under the given circumstances, we are of the considered opinion that the impugned order treating these two companies as comparable cannot be upheld on the assigned reasoning and, at the same time, the action of the TPO in excluding these two companies on the basis of incorrect calculation of the assessee’s percentage of Personnel cost to Total expenses and the consequential wrong filter also cannot be countenanced. In our considered opinion, the ends of justice would meet adequately if the impugned order on this score is set aside and the matter is remitted to the AO/TPO for a fresh determination of the comparability or otherwise of CS Software Enterprises Ltd. and Spanco Telesystems and Solutions Ltd.
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