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2023 (6) TMI 23 - AT - Income TaxTP Adjustment - comparable selection - AR submitted that the turnover of the assessee is Rs.52 crores and the TPO while applying the turnover filter did not apply the upper turnover filter of Rs.200 crores - HELD THAT:- The Tribunal in the case of Autodesk India Pvt.Ltd. [2018 (7) TMI 1862 - ITAT BANGALORE] took note of all the conflicting decision on the issue and rendered its decision held as that high turnover is a ground for excluding companies as not comparable with a company that has low turnover. Thus we hold that companies whose turnover in the current year is more than Rs.200 Crores should be excluded from the list of comparable companies. Working capital adjustment - As decided in Huawei Technologies India P. Ltd. [2018 (10) TMI 1796 - ITAT BANGALORE] there would remain no comparable uncontrolled transactions for the purpose of comparison. The transfer pricing exercise would therefore fail. Therefore, in keeping with the OECD guidelines, endeavor should be made to bring in comparable companies for the purpose of broad comparison. Therefore, the working capital adjustment as claimed by the Assessee should be allowed. We remit the issue of TP adjustment made back to TPO for a denovo consideration with a direction to keep in mind the above decisions of the coordinate bench with regard to application of turnover filter and working capital adjustment for determination of ALP, taking into account the details submitted by the assessee after allowing an opportunity of hearing to the assessee. Inclusion of non-AE transactions for the purpose of ALP - contention of the revenue is that the terms of transaction between the assessee and the other person is influenced by the AE and accordingly the transactions with local vendors is a deemed international transaction - HELD THAT:- DRP has upheld that decision of the TPO without analysing the provisions under which the transaction is deemed as international transaction and without calling for any relevant documents in this regard. As further notice that the DRP has stated that no segregation of accounts for AEs and Non-AEs was available and segment-based information pertaining to AE and Non-AE sales and purchases was to be provided. As submitted by the ld AR we see no merit in this contention since the raw materials procured from AEs and non-AEs have been consumed in making sale of finished goods to only one customer who is not an AE u/s 92 and accordingly the question of providing a break-up of revenue and cost pertaining to AEs and Non- AEs segments does not arise. Transactions with the local vendors the terms of which are not influenced by Comer SpA cannot be treated as deemed international transaction and accordingly cannot be included for the purpose of ALP adjustment. TPO is directed accordingly to consider only the transaction with AE for the purpose of determination ALP in accordance with the directions given in this order. Appeal of the assessee is partly allowed.
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