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2017 (11) TMI 1861 - AT - Income TaxTP Adjustment - comparable selection - HELD THAT - Tribunal order rendered in the case of DCIT vs. Electronics for imaging India Pvt. Ltd. 2016 (2) TMI 1123 - ITAT BANGALORE the profile of that assessee was noted and as per the same that assessee was engaged in Software Development services and sales Marketing Support Services. Both were benchmarked separately and the paras of the tribunal order referred to before us are in respect of Marketing Support Services. In the present case also the dispute is regarding Marketing Support Services provided by the assessee. Hence the profile of the present assessee and Electronics for imaging India Pvt. Ltd. is same. Hence we respectfully follow this tribunal order and hold that in the present case also this comparable i.e. Asian Business Exhibition Conferences Ltd. should be excluded from the final list of comparable. Applying RPT filter of 25% - restore the matter back to AO/TPO for a fresh decision in respect of inclusion/exclusion of comparable by applying 25% RPT filter Working Capital Adjustment - direction of DRP that Working Capital Adjustment should be granted on actual basis without any cap confirmed. Addition made u/s 40A(7) - contribution to fund - HELD THAT - Although the basis of the order of DRP is different but in view of this subsequent development the objection of the AO for which he made this disallowance does not survive and therefore we decline to interfere in the order of DRP on this issue also.
Issues:
1. Appeal by revenue and Cross Objection by assessee against Assessment Order dated 29.01.2015 for Assessment Year 2010-11. 2. Grounds raised by revenue and assessee in their respective appeals. 3. Exclusion of certain comparables by DRP. 4. Working Capital Adjustment without cap. 5. Corporate tax issue and approval granted by CBDT for gratuity fund trust. Analysis: 1. The appeal by the revenue and Cross Objection by the assessee were directed against the Assessment Order for the year 2010-11. The revenue raised various grounds challenging the directions of the Dispute Resolution Panel (DRP) regarding the exclusion of certain comparables, working capital adjustment, and disallowance under section 40A(7). The assessee, on the other hand, objected to the TP adjustment computation, selection of comparables, and other issues related to the transfer pricing analysis. 2. The revenue contended that the DRP erred in excluding certain comparables like HCCA Business Services Pvt. Ltd., Hindustan Housing Co. Ltd., and Killick Agencies & Marketing Ltd. The DRP directed the TPO to exclude these comparables due to functional differences and related party transactions exceeding 25%. The assessee raised objections to the TP adjustment computation, comparables selection, and transfer pricing analysis undertaken by the TPO and DRP. 3. The DRP's decision to exclude certain comparables was based on functional dissimilarities and related party transaction percentages. The assessee specifically objected to the inclusion of Asian Business Exhibition & Conferences Ltd. as a comparable, citing tribunal orders supporting its exclusion. The Tribunal upheld the assessee's objection and excluded the said comparable from the final list. 4. The issue of Working Capital Adjustment without a cap was also raised, with the revenue supporting the TPO's decision and the assessee relying on a tribunal order in favor of granting the adjustment on an actual basis without a cap. The Tribunal, following precedent, declined to interfere with the DRP's decision on this matter. 5. Regarding the corporate tax issue and approval granted by CBDT for the gratuity fund trust, the revenue and assessee presented conflicting arguments. The CBDT's subsequent approval of the trust led to the conclusion that the objection raised by the AO for disallowance did not hold, resulting in the Tribunal declining to interfere with the DRP's decision on this issue. In conclusion, the Tribunal allowed the Cross Objection filed by the assessee and partly allowed the appeal filed by the revenue for statistical purposes, based on the detailed analysis and application of relevant legal principles and precedents to the issues raised in the appeals.
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