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2017 (9) TMI 1586 - AT - Income TaxTPA - ALP determination - Applying the entity level turnover - Held that:- It is undisputed and apparent from the directions of the Hon’ble DRP that the Hon’ble DRP had directed the TPO to calculate the ALP by restricting the adjustment to the international transaction and also allowing credit of amount of ₹ 3698683/- already added back by the assessee in the computation of taxable income. It is very much evident that while passing the order subsequent to the directions of the Hon’ble DRP, the AO has not followed the directions of the Hon’ble DRP in this regard and has proceeded to calculate the ALP by applying the entity level turnover. Therefore, we deem it fit to restore this issue to the file of the TPO/AO for giving effect to the directions of the Hon’ble DRP in a proper manner after verification and after affording due opportunity to the assessee to present its case. Accordingly, ground no. 6 and 8 of the assessee’s appeal stand allowed for statistical purposes. Challenging selection of two comparables viz. ITDL Imagetic Ltd. And Tirupati Incs Ltd. - Held that:- On going through the profiles of these two comparables, it is undisputed that ITD Imagetic Ltd. is not manufacturing business whereas Tirupati Inc. Ltd. manufacturers printing inks on the other hand, the assessee is a trading company. It is undisputed that the risk profile of a manufacturing company is different from that of a trading company. We are of the considered opinion that the risk profile and the functionality of these two companies being different than that of the assessee company, these two companies should not have been selected as a comparable. Accordingly, we restore these two comparables to the file of the TPO with the direction that these two companies be excluded from the final set of comparables if on verification it is confirmed that both these two companies carry out manufacturing operations. Needless to say, the assessee will be afforded due opportunity of being heard at the time of verification by the TPO. Accordingly, ground no. 7 stands allowed for statistical purposes.
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