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2022 (8) TMI 1283 - AT - Income TaxTP Adjustment - Comparable selection - Application of turnover filter - functional dissimilarity - HELD THAT:- The Bangalore Bench of the Tribunal in the case of BORQS Software Solutions Pvt. Ltd. [2021 (10) TMI 1351 - ITAT BANGALORE] has considered a host of rulings on this issue including that of the High Courts wherein divergent views were taken with respect to the application of different filters. It was held by the Tribunal that the application of the turnover filter is justified on the basis of the classification of companies as per the report of Dun and Bradstreet. Similarly, the Tribunal, in the case of ANSR Global Corporation Pvt. Ltd. [2022 (4) TMI 1441 - ITAT BANGALORE] directed the application of a higher turnover filter to exclude companies with a turnover of more than Rs.200 crore. Since the assessee in the present case has a turnover of Rs.20.06 crore, companies reporting turnover above a threshold are not considered comparable. Accordingly, by following the above orders of the Tribunal, we direct the AO / TPO to apply the appropriate upper turnover filter and consider exclusion of the above seven companies having turnover in excess of Rs.200 crore. Exclusion of Infobeans Technologies Limited on the ground of functional comparability - Tribunal held the finding of DRP has not been countered by the assessee in the said case. However, the company’s response to the notice u/s 133(6) of the I.T.Act is contrary to the functions set out in the audited financial statements (enclosed as Annexure-A), and therefore, the same cannot be relied upon. Moreover, the website of the company shows tht the company is engaged in diverse service, which are not similar to functions of the assessee in the instant case. Since the learned AR has been able to clearly established that Infobean Technologies Limited is not functionally comparable to that of the assessee, we follow the orders of the ITAT referred and direct the AO / TPO to exclude Infobean Technologies Limited from comparable list. It is ordered accordingly. Working capital adjustment - In the view of the ruling in the case of M/s.Huawei Technologies India (P) Ltd. [2018 (10) TMI 1796 - ITAT BANGALORE] the basis of rejection of the relief by the DRP is no longer valid. We therefore, direct the AO/TPO to consider the workings in the light of the aforesaid ruling and allow appropriate adjustment in arriving at an arm’s length price. We hold and direct accordingly. Correction of margin - In view of the principles of natural justice and pendency of the application for rectification of mistake apparent from the records, we deem it appropriate to remand the matter back to the file of the AO / TPO to examine the claims of the assessee with regard to erroneous computation of margin. Accordingly, groundraised by the assessee is allowed for statistical purposes.
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