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2019 (11) TMI 91 - AT - Income TaxTP Adjustment - Whether international transactions undertaken by the appellant do not satisfy the arm’s length principle envisaged under the Income-tax Act 1961 Act? - TPO applied minimum threshhold limit of 25% export earning from Software Development Services wherein companies whose export revenues from Software Development Services are less than 25% of the operating revenues were excluded - HELD THAT:- Appellant is mainly an export oriented software development provider thus companies functionally dissimilar with that of assessee need to be deselected from final list. Act does not provide directions as to what percentage RPT transaction have material effect on the overall margins. In the definition of the “Associated Enterprises” in section 92A(2)(a), it is provided that one enterprise holding 26% shares in other enterprise can be considered as an AE. Similarly, u/s 40A(2b) of the Act, it is provided that persons having substantial interest is a person carrying not less than 20% of voting power in that company. Keeping these provisions in mind, we are of the view that the filter of 25% applied by the TPO is apt.
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