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2020 (6) TMI 428 - AT - Income TaxTP Adjustment - comparable selection - HELD THAT:- All the companies selected by the TPO are liable to be excluded on the basis of turnover filter applied by the ld. DRP and the decision rendered by the Co-ordinate Benches. Since no comparable company would remain for determining the Arms Length Price of international transaction, we are of the view the entire issue should be restored to the file of the AO/TPO for undertaking the exercise afresh by selecting fresh set of comparable companies in respect of sotware R & D segment. Accordingly we set aside the order passed by the AO/TPO on this issue and restore the same to his file for examining the issue afresh. TP adjustment in respect of market support service - HELD THAT:- As A.R submitted that the TPO did not provide sufficient opportunity to the assessee to object to the comparable companies selected by him, we are of the view that this issue also needs to be set aside to the file of the AO/TPO. Accordingly, we set aside the order passed by AO on this issue and restore the same to the file of the AO/TPO. Computation of ALP on the entire operating costs - whether arm’s length price ought to be computed only for the international transactions and not on the basis of costs incurred by the appellant? - HELD THAT:- PLI adopted by the assessee is operating profit by operating cost. The operating revenue has been generated by the assessee during the first two months namely April & May, 2004 only. So we find merit in the contentions of the assessee that the operating cost relatable to the operating revenue generated by the assessee should alone be considered for computing operating margin for the purpose of determining Arm’s length price of the international transactions. Considering the expenses incurred by the assessee in subsequent months, where no revenue was generated, would result in distorted picture. Hence there is merit in the contentions of ld. AR that the expenditure incurred during the first two months should alone be considered for arriving at the profit, in view of the fact that the assessee has stopped the operations in the month of May - we hold that the TPO was not justified in considering the operating results of the whole year for computing operating margins of the assessee. We notice that the workings furnished by the assessee for the first two months of the year have not been examined by the AO/TPO and hence the same requires examination in the light of discussions made supra. Accordingly, we restore this issue to the file of the AO/TPO for determining the operating margins of first two months by considering the operating revenue and operating cost of the first two months only in accordance with the discussions made supra. Appeals of the assessee are treated as allowed for statistical purposes.
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