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2023 (4) TMI 79 - ITAT MUMBAITP adjustment - ALP determination - Comparable selection - Exclusion of Nihilent Anaytics Ltd. - HELD THAT:- Company having huge asset base would be able to command a better margin on the prices of goods or services rendered based on huge economies of scale and volume of operations. Hence, based on one of the parameters of FAR analysis i.e. assets employed, we hold that this comparable would not be a good comparable with that of the assessee company. Hence, the ld. TPO / AO is directed to exclude the same from the final set of comparables while re-working the ALP of the international transaction. Inclusion of Sasken Communications and Technologies Ltd. and TVS Infotech Ltd. - We find from the perusal of the financial statements of Sasken Communications and Technologies Ltd, its export turnover contributed 70.27% of its total turnover. TPO was justified in rejecting the same as a good comparable with that of the assessee company based on export filter application. Similarly, from the perusal of the financial statements of TVS Infotech Ltd as on 31/03/2016, its export turnover of Rs.1316,67,746/- worked out to 56.84% of total turnover of Rs.2316,46,376/-. Yet another argument advanced that there is no sanctity of applying 75% is concerned, we find that the Hon’ble High Court in the case of Pr. Commissioner of Income Tax vs. Convergys India Services Pvt. Ltd., in 142 taxmann.com 276 (Delhi) has already approved the applicability of 75% export filter. Apparently this is done primarily to exclude predominantly domestic companies which cannot be compared with the companies having major earning from exports. This is because economic circumstances of such companies would be different which is also recognised by Rule 10B(2) of the Income Tax Rules 1962. Thus we hold that the ld.TPO /ld. AO was justified in excluding TVS Infotech Ltd. from the list of comparables chosen by the assessee. TPO is directed to re-work the arm’s length price of international transaction in view of the aforesaid observations. Accordingly, the ground No. 1 raised by the assessee is partly allowed for statistical purposes.
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