TMI Blog2018 (3) TMI 222X X X X Extracts X X X X X X X X Extracts X X X X ..... pacity may resulted in a distorted picture, either way. The ITAT, in the present case, followed a previous precedent and was of the opinion that a broad threshold figure of 25% RPT in the case of comparables was essential. Applying that rationale, the ITAT excluded some comparables listed in the TPO s report. There is no error of law per se in this approach. As to the exclusion of M/s Wipro Limited, here too, the Court is of the opinion that the brand value of an entity has a significant role in its ability to garner profits and negotiate contracts. While considering the comparables, the likelihood of profits derived or attributable to the brand having regard to the consistency of the quality of services that an entity is able to offer w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( TPO ) accepted TNMM as the most appropriate method for the determination of the Arm s Lengh Price ( ALP ). However, the TPO excluded 13 comparables out of the list of 22 comparables on the basis that they were not premised upon the relevant single year data but rather based upon multiple years data. The OP/TC yielded an operating margin to the AE at 11.61% (within the tolerable range of +/-5% of the three years weighted average of OP/TC), which was computed at 12.51%. The average margin considered by the TPO of comparables was 22.09%. On the basis of application of settled statutory principles, the TPO made an upward adjustment of ₹ 3,25,93,468/-. A draft assessment order was made by the Assessing Officer ( AO ) on the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etion but rather remitted the matter for fresh consideration by the Assessing Officer ( AO ). The Court is of the opinion that there is no merit in the Revenue s arguments. The RPT filter, is relevant and fits in with the overall scheme of a transfer pricing study which is premised primarily on comparing light entities having similar if not identical functions. Therefore, if a particular entity predominantly has transactions with its associate enterprise in excess of a certain threshold percentage, its profit making capacity may resulted in a distorted picture, either way. In these circumstances, the ITAT, in the present case, followed a previous precedent and was of the opinion that a broad threshold figure of 25% RPT in the case of c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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