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2017 (7) TMI 198 - AT - Income TaxTPA - comparability - selection criteria - Held that:- In the present case, the assessee itself excluded those companies which had been declared sick or were having negative net worth. However, a company cannot be excluded from the list of comparables if it was a loss making company in view of the decision of the ITAT Special Bench Chandigarh in the case of DCIT Vs Quark Systems (P.) Ltd. (2009 (10) TMI 591 - ITAT, CHANDIGARH). Therefore, in our opinion, the TPO/DRP was not justified in excluding M/s Besant Raj International Ltd. only on this basis that it was a loss making company, particularly when it was functionally the same and was deriving income from consultancy services as in the case of the assessee. Since this company is functionally similar with the assessee and making of the loss cannot be criteria for the exclusion from the list of comparables. We, direct the AO to include this company in the list of the comparables. As regards to the exclusion of M/s Capital Trust Ltd. is concerned, it is an admitted fact that the said company was engaged in the foreign consultancy but the assessee is not engaged in such activity. Therefore, this company cannot be considered as functionally similar with the assessee, so it was rightly excluded from the list of the comparable. M/s Priya International Ltd. was functionally different from the assessee and should not have been included in the list of the comparable. We, therefore, direct the AO to exclude M/s Priya International Ltd. from the list of comparables and then work out the OP/TC ratio.
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