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2019 (4) TMI 1380 - AT - Income TaxTP adjustment - comparable selection - correctness of excluding DCW Ltd from the final list of comparables - losses are continuously incurred for three or more years that a comparable can be excluded, but the question really is as to which three years are to be taken into account - whether the period to be taken into account is any three years in the past, or the current year and two immediately preceding years ? - arm's length price for purchase of raw material pertaining to manufacturing activity - HELD THAT:- We find guidance from Rule 10B(4) which provides that “the data to be used in analysing the comparability of an uncontrolled transaction with an international transaction shall be the data relating to the financial year [(hereafter in this rule and in rule 10CA referred to as the 'current year')] in which the international transaction has been entered into” and proviso to this rule further provides that “data relating to a period not being more than two years prior to [the current year] may also be considered if such data reveals facts which could have an influence on the determination of transfer prices in relation to the transactions being compared”. The fact about profit in the financial year 2010-11, as also in the financial year 2015-16 onwards, is not even disputed by the revenue authorities below. In view of these discussions, the exclusion of DCW Ltd from the list of final comparables is not justified on the ground that it is a persistent loss making company. In the event of DCW Ltd being accepted as a valid comparable, there will be no need to deal with other issues raised with respect to this arm’s length price determination, as, in that event, the profitability of the tested party will be well within acceptable range. TP Adjustment relating to availing of management services - ALP determination of payments tp AEs - as per TPO assessee has clubbed the payment of management service charges with manufacturing/ trading and benchmarked such aggregated transactions together using Transactional Net Margin Method as the Most Appropriate Method, using the assessee as the tested party - HELD THAT:- relied on decision in own case [2017 (3) TMI 1727 - ITAT AHMEDABAD] The only justification for taking ALP of services at NIL is under CUP but then there has to be something on record to show that in an arm's length situation these services are rendered without consideration. The worth of services cannot be decided by the TPO, nor is it open to him to question, as such an approach implicitly does, the commercial expediency of these services. It is only elementary that how an assessee conducts his business is entirely his prerogative and it is not for them to decide what is necessary for an assessee and what is not. It is not for the TPO to question assessee's wisdom in making payment for the services, which, in the opinion of the TPO, are not of "much" use. The TPO has travelled much beyond his powers in questioning commercial wisdom of assessee's decision to take benefit of expertise of its AEs. As perused the evidence of services rendered and the nature of services in question, on random sample basis. In our considered view, there is reasonable evidence of the rendition of service and it cannot be open to TPO to proceed on the basis that the services were not rendered. The method of ascertaining the arm's length price, on the basis of TPO's subjective perception about worth of services, is not sustainable in law either. In view of these discussions, as also bearing in mind entirety of the case, we deem it fit and proper to delete the impugned ALP adjustments. - Decided in favour of assessee.
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