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2017 (4) TMI 410 - HC - Income TaxTPA - reject the 53 comparable entities - scope of adjudication in remand proceedings - Held that:- It is obvious that the ITAT was not seized of any dispute with respect to the appropriateness of including any comparable or excluding any from the list furnished by the assessee. The record nowhere shows that the original TPO report, or the draft assessment order, or even the DRP’s determination reflects any concern about the appropriateness of the inclusion of any comparable on the ground of its/their functionality. The ITAT’s substantial ruling shows that the TPO had followed the previous order and changed the basis of PLI of Operating Profit/Total Cost to FOB value of the export goods in the hands of the AEs. The assessee had computed its OP/TC at 7.56% based on the cost incurred by it as constituting 'Total cost'. This is reflected in the finding and conclusion that “We, therefore, set aside the impugned order and hold that the 'total cost' being the denominator in the PLI of OP/TC, has to be taken as the costs incurred by the assessee and not the FOB value of goods between third party enterprises sourced through the assessee. In other words, the tested party should be the assessee and not it's A.E”. The operative part of the ITAT’s direction to carry out the exercise afresh since it did not have the figures relating to the comparables has to be therefore, seen in the context of what was actually done. Therefore, the Revenue’s argument that the TPO/AO could doubt the appropriateness of the comparables used by the assessee is insubstantial and unmerited. The court is of opinion that the impugned show cause notice cannot be sustained. Firstly, when there is a remand on the basis of a specific finding (in this case, the untenability of shifting of the OP/TC to FOB) the TPO could not have travelled beyond it, given that there was no controversy ever about the inclusion of any comparable. Concededly there was no controversy about the appropriateness of inclusion of any comparable for the ALP determination purpose. Nor was there any finding or direction on that score. In the given circumstances, the Revenue could not have seized upon the direction to determine it “afresh” as the basis for going into the merits of inclusion of such comparables. Secondly and more fundamentally, the issue of comparables’ inclusion is not one that goes to define jurisdiction itself. There is authority for the proposition that invocation of jurisdiction is itself in issue, notwithstanding that being not subject to remand. However, that is not the case here. The remand was essentially consequential to give tax effect to the findings of the ITAT.
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