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2020 (12) TMI 1189 - AT - Income TaxTP Adjustment - selecting the tested party for the purpose of applying the TNMM - Comparable selection - HELD THAT:- While selecting the tested party for the purpose of applying the TNMM, the functional profile of the transacting entities is required to be taken into consideration and the entity having simpler functional profile i.e. the entity not assuming significant risks and employing non-routine intangibles should be selected as the tested party. We note that the assessee’s objection being selected as a tested party were not dealt in the proper perspective by the Ld. CIT (A) and, therefore, this issue needs re-examination by the Ld. CIT (A). Comparable selection - TPO has selected 99 comparables without actually conducting FAR analysis in respect of each comparable and has undertaken the exercise of selection without applying any quantitative and qualitative filters. TPO has also not assigned any reason for the selection of these comparables and the Ld. CIT (A) has also dismissed the assessee’s objection against selection of these comparables without assigning any reason except by making general observations like that the data provided by the assessee was insufficient, the evidences were sketchy and that quantitative details were not available. We are not in agreement with the summery dismissal of the objections of the assessee in this regard. Contention of the department that relevant details were not filed is wholly incorrect as we have gone through the voluminous evidences and data supplied by the assessee before the TPO as well as the Ld. CIT (A) in this regard. In a such situation, it is our considered opinion that the entire transfer pricing exercise needs to be done afresh by the TPO and, therefore, we restore the issue of transfer pricing adjustment to the file of the TPO for fresh analysis and verification for deciding the issue afresh after duly considering the detailed workings, arguments and evidences filed earlier by the assessee in this regard. The TPO is also directed to give proper opportunity to the assessee to present its case prior to passing a detailed order as per provision of law.
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