2015 (12) TMI 1807 - AT - Income Tax

TP Adjustment - comparable selection - HELD THAT - The undisputed facts on record are that the aforesaid company was having RPT transactions which appear to be well above the accepted limits. Requisite documents evidencing these facts are already held on record. But, these facts were not examined by the lower authorities. In view of the judgments relied upon by the Ld. Counsel, we find that since this issue goes to the root of the matter, the assessee should be given opportunity to raise a legal plea even at this stage before the Tribunal. In all fairness and to meet ends of justice, we find it appropriate to send this issue back to the file of AO/TPO for a fresh decision with respect to the said company. The assessee shall put forth all requisite material before the AO/ TPO in support of its claim, for which proper opportunity should be provided. With these directions, we send this issue back to the file of the AO/TPO. Thus, additional ground is treated to be allowed for statistical purposes.

Summary

Issues:
Challenge of considering a company with related party transactions as a comparable for transfer pricing analysis.

Analysis:

Issue 1: Additional Ground Submission
The appellant challenged the inclusion of a company with significant related party transactions as a comparable in the transfer pricing analysis. The appellant submitted an additional ground before the Tribunal, arguing that the said company should not have been considered due to the related party transactions exceeding acceptable limits. The appellant relied on various judgments to support the claim that disputing a comparable before the Tribunal is permissible.

Issue 2: Arguments and Evidence
During the hearing, the appellant's counsel presented detailed evidence from the paper book highlighting the related party transactions of the company in question. The counsel emphasized that the related party transactions were well above the accepted limits, making the inclusion of the company as a comparable unjustified. The appellant requested the matter to be sent back to the Assessing Officer for a fresh decision considering the legal position and the factual evidence.

Issue 3: Respondent's Opposition
The CIT-DR opposed the appellant's submissions, arguing that the related party transaction filter was not applied by the appellant or the Transfer Pricing Officer (TPO). However, the CIT-DR acknowledged the presence of relevant documents regarding the related party transactions of the company. The respondent relied on a judgment from the Delhi Bench ITAT to support their position.

Issue 4: Tribunal Decision
After considering the arguments from both sides and the undisputed facts regarding the related party transactions, the Tribunal found that the issue raised by the appellant was fundamental to the case. The Tribunal decided to give the appellant an opportunity to present their case before the AO/TPO, directing a fresh decision on the inclusion of the company as a comparable. The Tribunal emphasized providing the appellant with a fair chance to substantiate their claim with necessary material.

Conclusion:
The Tribunal partially allowed the appeal filed by the appellant, sending the specific issue back to the Assessing Officer for reevaluation in light of the related party transactions of the company in question. The Tribunal's decision aimed to ensure fairness and uphold the principles of justice in the transfer pricing analysis.