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2019 (4) TMI 1310 - AT - Income TaxTP adjustment - comparable selection - HELD THAT:- Assessee company, engaged in the business of span technology consulting, application services, systems integration, software development, maintenance, re-engineering and independent testing services thus companies functionally dissimilar with that of assessee need to be deselected from final list. Assessee has adopted 10% RPT whereas TPO adopted 25% filter for RPT. Generally, the %age of RPT is determined based on the availability of comparables. When the comparables are more, the RPT filter is adopted at minimum level whereas when the comparables are less, the RPT % are fixed liberally. Generally, it is selected between 15% or 25% depending upon the availability of comparables. In the given case, TPO has selected 19 comparables. Therefore, it shows that comparables are reasonably more, hence, TPO could have applied 15%. In the given case, out of 19 comparables, assessee accepted only 7 and balance it objected. Therefore, in our considered view, in the restricted atmosphere of selection of comparables, the %age should be 25% not 15%. The more we restrict, chances of loosing reasonable comparability. Therefore, we reject the contention of the assessee and exclusion of the said comparable by the assessee from the list of comparables, is hereby rejected. Exemption u/s 10B - scope of TP adjustment when assessee is eligible for exemption - shifting of profit - HELD THAT:- The decision making and shareholder appetite of expansion will not remain same for all the time or countries. Irrespective of profit making ability and exemption available in the country of operation, the actual profit making ability cannot be determined. Irrespective of situation, the transfer price of the global market and the corporates must be within the band of pricing. It cannot fluctuate. It can be determined or evaluated only by means of comparing pricing pattern of Indian market and global market. When it is found that it is within the band of prices adopted globally, no need of making any adjustment. It cannot be restricted based on the prevailing tax rate in other countries. As we said earlier, the tax saving alone cannot be a decision making process to restrict any TP adjustment. Therefore, ground is dismissed. FBT expenditure treatment as business operating expenses - HELD THAT:- As a principle, the profit margin should be compared with comparables by following similar set of rules and accounting principles. In case of following different methods/rules, we end up reaching different conclusions. Therefore, we remit this issue also to the file of AO/TPO to treat the FBT as business operating expenses for both the assessee as well as comparables to determine the margin and then compare the same for arriving proper ALP. Accordingly, additional ground raised by the assessee is allowed for statistical purposes.
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