2013 (1) TMI 773 - ITAT BANGALORE

Transfer pricing adjustments - calculation of ALP and selection of comparables:- Held that:- Assessees engaged in software development services business - 8 comparables are to be rejected from the TPO's list on account of the turnover filter - that 5 companies are to be excluded on account of functional dissimilarity - Turnover filter - the size of the comparable is an important factor in comparability - when companies which are loss making are excluded from comparables, then the super profit making companies should also be excluded - TPO is directed to take segmental margins of 23.11% for comparability - ordered accordingly

Related Party transaction - an entity can be taken as uncontrolled if its related party transactions do not exceed 10 to 15% of total revenue - cannot be said to have significant influence the profitability of the comparables - TPO is directed to exclude, after due verification, those comparables from the list with the related party transactions or controlled transactions in excess of 15% of the total revenue - Ordered accordingly - Decided partly in favor of assessee