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2018 (5) TMI 1533 - AT - Income TaxTransfer pricing addition - comparable selection criteria - functional similarity - Held that:- The assessee is engaged in rendering research, management consultancy and advisory services to clients interested in investing in India, thus companies functionally dissimilar with that of assessee need to be deselected from final list. Treatment of certain expenses not related to the transaction with AE as part of the operating cost - Held that:- DRP while rejecting the objections raised by the assessee in this regard has only noted that it has duly considered the arguments of the assessee and in view of the fact that the assessee was earning only service income and that too from one AE, it cannot be said that these expenses did not have any nexus with earning of service income. It is our considered opinion that this conclusion by DRP has been reached without any sound reasoning and without appreciating and duly considering the submissions made by the assessee in this regard. It will be in the fitness of things that the DRP should reconsider and re-adjudicate this issue relating to sponsorship and brokerage expenses after taking into account the settled judicial precedents as well as the evidences in this regard. Incorrect computation of operating margins of certain comparable companies - Held that:- As held by the ITAT Mumbai Bench in the case of DHL Express (India) Private Limited [2011 (4) TMI 856 - ITAT MUMBAI] wherein miscellaneous income like interest income, rent received, dividend received, penalty collected, rent deposits written back, foreign exchange fluctuation and profit on sale of assets were held to be not forming part of operational income. Therefore, keeping in mind, the judicial precedents as well as the submissions of the assessee in this regard, we restore ground to the file of the AO/TPO for re-computing the operating profit margin of the remaining comparable companies after giving due opportunity to the assessee to present its case.
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