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2018 (10) TMI 923 - AT - Income TaxTPA - Transfer pricing - selection of comparable - selection criteria - Held that:- The assessee is engaged in the business of manufacture and trading of laboratory and processing equipment. The assessee imports products from IKA Group for sale in the domestic market and also undertakes manufacturing operations locally to export the products to IKA Group. In addition, the assessee also provides research and development services and marketing and technical support services to Group companies, thus companies functionally dissimilar with that of assessee need to be deselected. Capacity adjustment to account for differences in capacity utilization of the Appellant vis-à-vis the comparable - Held that:- The Indian transfer pricing regulations, OECD Guidelines and the US transfer pricing regulations call for an adjustment to be made in case of material differences in the transactions or the enterprises being compared so as to arrive at a more reliable arm's length price/ margin. While the Indian transfer pricing regulations refer to the adjustments on uncontrolled transactions, however the same has to be read with Rule10B(3) of the Rules which clearly emphasizes the necessity and compulsion of undertaking adjustments. Hence in case appropriate adjustments cannot be made to the uncontrolled transaction, due to lack of data, then in order to read the provisions of transfer pricing regulations in harmony, the adjustments should be made on the tested party. - adjustment to the profit margins have to be made on account of underutilization of capacity. Disallowance of prior period expenses - non deduction of tds - Held that:- The Assessee had made disallowance of the disputed sum for the reason that tax was not deducted at source on the provision so made in the books and in view of the provisions of Sec.40(a)(ia) for non deduction of tax at source, the expenditure cannot be allowed as deduction. The limited prayer of the learned counsel for the Assessee was that as and when TDS is paid the deduction in question has to be allowed. We are of the view that the prayer for allowing deduction of expenses in the year in which TDS is paid to the Government is acceptable subject to the condition that the liability in question should be crystalized/ascertained. It is made clear that crystallization even if it is in earlier period should not result in disallowance u/s.40(a)(ia) of the Act and on payment of TDS the deduction should be allowed subject to such expenses being otherwise allowable.
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