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2020 (5) TMI 512 - AT - Income TaxTP Adjustment - not accepting weighted average margin considered by assessee in transfer pricing study for computing arm’s length margin in case of comparables - HELD THAT:- Proviso to Rule 10 B (4) would apply only in a situation where, data relating to relevant financial year reveals facts which could influence determining transfer price. Further rule 10 B (5) gives an option of using either of the method with the proviso that at the time of determination of arm’s length price of international transaction during the course of assessment proceedings for relevant assessment year in the even data for relevant financial year is available, then such data should be used irrespective of the fact that the data was not available at the time of furnishing return of income for relevant year. As we analyse transfer pricing assessment proceedings, it is noted that at the time of assessment, data for relevant assessment year was available, which was used by Ld.TPO, as against average of multiple year data used by assessee transfer pricing document. This in our view is in accordance with the rules specified. We, therefore, do not find any infirmity in analysis carried out by Ld.TPO by using relevant year data. Valid filter for assessing comparability - Assessee before us has turnover of ₹ 98.25 crores so, turnover filter of ₹ 9 crores on lower side to ₹ 980 crores on upper side, should be considered provided the functional similarities stands satisfied. We note that companies that have been pointed out by assessee is very large company that has turnover more than ₹ 1000 crores. Assessee has been categorised to be a captive service provider having turnover of 98.25 crores. Further it is noted that assessee do not own any intangibles whereas, the company alleged for exclusion by assessee by applying turnover filter owns huge brand, holding invaluable intangibles and are engaged in diversified activities. We therefore are of opinion that turnover is a valid filter for assessing comparability. Functionality - Companies functionally not comparable with a BPO service provider like that of assessee need to be deselected. Adjustment of notional interest on outstanding receivables - HELD THAT:- This Bench referred to decision of Special Bench of this Tribunal in case of Special Bench of ITAT in case of Instrumentation Corpn. Ltd. [2016 (7) TMI 760 - ITAT KOLKATA] held that outstanding sum of invoices is akin to loan advanced by assessee to foreign AE., hence it is an international transaction as per explanation to section 92 B. Alternatively, argued that in TNMM, working capital adjustment subsumes sundry creditors - computing interest on outstanding receivables and lones and advances to associated enterprise would amount to double taxation. Hon’ble Delhi Tribunal in case of Orange Business Services India Solutions Pvt. Ltd. vs. DCIT [2018 (2) TMI 1151 - ITAT DELHI] as directed the TPO to study the impact of the receivables appearing in the accounts of the assessee; looking into the various factors as to the reasons why the same are shown as receivables and also as to whether the said transactions can be characterized as international transactions - we deem it appropriate to set aside this issue to Ld.AO/TPO for deciding it in conformity with the above referred judgment.
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