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2019 (7) TMI 1077 - AT - Income TaxTP Adjustment - CIT(Appeals) had directed to include the company “Maveric Systems Ltd” in the final list of comparables with that of the assessee - TPO had rejected on account of extraordinary cost/events and also failed the filter export to sales filter of 75% - HELD THAT:- On perusal of the Director”s Report of the said company, no categorical/specific finding is there that extra ordinary cost has been incurred by this company. The Ld. CIT(Appeals) also has given findings perusing all the relevant factors/criterias and we do not find any infirmity in his order. Therefore, relief provided to the assessee regarding the inclusion of “Maveric Systems Ltd.” in the final list of comparables is hereby sustained. With regard to the second part of the first ground raised by the Revenue regarding “filter export to sales filter of 75%”, we observe that no where it is coming from the order of the Transfer Pricing Officer or from Ld. CIT(Appeals). Therefore, we are of the considered view that this is not an issue for adjudication since no where it was considered by the Revenue Authorities in their respective orders and therefore, inclusion of this part in the ground of appeal is infructuous. Ground No.1 of Revenue’s appeal is dismissed. Exclude of certain comparables - alleged that excluded only on the ground of higher turnover and without analyzing the FAR of the comparables - HELD THAT:- In our considered view on perusal of the relevant findings of the Ld. CIT(Appeals), apart from considering the turnover, has also looked into various other factors. He had considered that the size of the company makes difference in undertaking risks. Bigger sized company is in a position to undertake more risks in the business as compared to the smaller sized companies. The size of the company can be categorized either on the basis of the capital or asset or on the basis of turnover. CIT(Appeals) has also referred to Para 3.43 of the OECD Guidelines mentioning size in terms of “sales” as one of the comparability criteria. In this regard, reference was also made to Rule 10TD of the Income Tax Rules which provide higher profitability for the companies having turnover of more than ₹ 500 Cr. So while considering size of the company, its capacity of risk taking, capital, assets and turnover have been considered by the CIT(Appeals). We, therefore, do not find any infirmity with the findings of the Ld. CIT(Appeals) and uphold the relief provided to the assessee. Thus, ground No.2 raised in appeal by the Revenue is dismissed. Inclusion of “E-infochips Limited” - HELD THAT:- It is an undisputed fact that the said company i.e. “E-infochips Limited” is engaged in diversified activities. “E-infochips Limited” has earned abnormal profit for the year under consideration (i.e. 56.44%) which cannot be considered as comparable. In fact there was extra ordinary fluctuation in profit margins over years from loss of (-) 14.33% in 2008-09 to super profit of 56.44% in 2010-11. Furthermore, segmental information of the activities undertaken is not available. CIT(Appeals) therefore, held that in absence of such segmental information specially IT services, ITes, inclusion of “E-infochips Limited” in the final set of comparable companies is not justified with that of the assessee. We do not find any infirmity in the findings of the Ld. CIT(Appeals) which is therefore upheld. Thus, additional ground Nos. 1 to 5 raised in appeal by the Revenue are dismissed.
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