9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (11) TMI 1605 - AT - Income TaxTPO - Comparable selection - inward Technologies Ltd. has been wrongly excluded from the list of comparable, therefore, the same should included in the list of comparables - AR prayed for excluding from the list of comparables Tata Technologies Ltd. having operating margin of 31.18% on the ground of high profit making company - Held that - There is no dispute in respect of settled position that the consistent loss making company has to be excluded from the list of comparables. A company is said to be consistent loss making when the company has incurred losses in the three consecutive financial years including the financial year in which the international transactions have been made. In the instant case Financial Year 2009-10 is relevant to the assessment year under appeal. Thus, the financial years to be considered for determining whether the company is consistent loss making are financial years 2007-08, 2008-09 and 2009-10. A perusal of the profit and loss account of Onward Technologies Ltd. placed on record shows that the said company has suffered losses in financial years 2007-08, 2008-09 and 2009-10. Thus, it is evident from the perusal of the financial results of Onward Technologies Ltd. that Onward Technologies Ltd. is consistent loss making company, therefore, the said company cannot be considered as a good comparable. Exclusion of Tata Technologies Ltd., the ld. AR has not substantiated as to how the said company has abnormal profits. We do not find any merit in the appeal of the assessee and the same is dismissed.
Issues:
1. Delay in filing appeal 2. Addition to taxable income under section 92C of the Income Tax Act, 1961 3. Exclusion of Onward Technologies Ltd. as a comparable 4. Inclusion of Tata Technologies Ltd. as a comparable 5. Related Party Transactions of Tata Technologies Ltd. Delay in filing appeal: The appeal by the assessee was filed with a delay of 88 days, and a petition for condonation of delay was submitted citing reasons for the delay. The Tribunal condoned the delay, considering it unintentional, and admitted the appeal for hearing on merits. Addition to taxable income under section 92C: The Assessing Officer made an adjustment of ?72,79,939 in the international transactions of the assessee under section 92C of the Income Tax Act, 1961. This adjustment was based on the exclusion of Onward Technologies Ltd. from the list of comparables due to consistent losses, leading to an increase in the arithmetic mean of the remaining comparables. Exclusion of Onward Technologies Ltd. as a comparable: The assessee contested the exclusion of Onward Technologies Ltd. as a comparable, arguing that the company did not qualify as a consistent loss-making entity based on its financial performance in relevant years. However, the Tribunal upheld the exclusion, determining that Onward Technologies Ltd. was indeed a consistent loss-making company and therefore not suitable as a comparable. Inclusion of Tata Technologies Ltd. as a comparable: The Tribunal dismissed the assessee's plea to exclude Tata Technologies Ltd. as a comparable, as the appellant failed to demonstrate that the company had abnormal profits. Consequently, the Tribunal found no merit in the appeal and upheld the inclusion of Tata Technologies Ltd. as a comparable. Related Party Transactions of Tata Technologies Ltd.: The Tribunal noted that Tata Technologies Ltd. had substantial Related Party Transactions, but this factor did not lead to the exclusion of the company as a comparable. The Tribunal dismissed the appeal of the assessee, leading to the final decision to uphold the addition to the taxable income and the inclusion of Tata Technologies Ltd. as a comparable. In conclusion, the Tribunal dismissed the appeal of the assessee, upholding the addition to taxable income and the inclusion of Tata Technologies Ltd. as a comparable in the transfer pricing study.
|
