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2020 (4) TMI 608 - AT - Income TaxTP Adjustment - comparable selection - HELD THAT:- Referring to market support services provided by the assessee, companies functionally different with that of assessee need to deselected from the final list of comparable. No merit in applying employee cost filter of 25%. Treatment of certain items as non-operating while computing margins of comparables which are foreign exchange gain/ loss, bank charges and provision for doubtful debts - HELD THAT:- Forex gain/loss arise in normal course of business due to realization of export proceeds, settlement of import payables or adjustment of customer advances at a different rate than the rate at which it was booked, and should be considered as operating while computing operating margins of comparables. Bank charges are levied by banks for maintenance of bank accounts and various other facilities intrinsically linked to business operations of an assessee and hence should be considered as operating while computing operating margins of comparables. Provision for doubtful debt is an estimated percentage of debtors that are not expected to pay during the year and hence directly relate to business operations of assessee and should be considered as operating while computing operating margins of comparables. Risk adjustment -There is no quarrel that the assessee has a cost plus business model operating in a low risk or almost risk mitigated environment as compared to the comparable companies who are independent service providers and bear significant risks.
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