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2021 (6) TMI 1126 - AT - Income TaxTP Adjustment - Comparable selection - inclusion of MPS Limited in the final set of comparables - ALP of the international transaction of rendering Information Technology Support Services - HELD THAT - MPS Limited is not only engaged in rendering ITES but is also into Software Products business. In the absence of any segmental information relating to ITES, this company loses comparability with the assessee company, which is engaged in rendering only ITES. We, therefore, direct to exclude this company from the list of comparables. To sum up, the impugned order is set-aside and the matter is restored to the file of the AO/TPO for re-computing the ALP of the international transaction of rendering Information Technology Support Services in the light of our above discussion. Needless to say, the assessee will be allowed reasonable opportunity of hearing.
Issues:
Transfer pricing adjustment of Rs.9,18,00,388 on rendering Information Technology Support Services. Analysis: The appeal was against the final assessment order regarding the transfer pricing addition. The assessee, a subsidiary of a US company, provided ITES through its Pune center. The AO referred the matter to the TPO for determining the ALP of international transactions. The TPO accepted TNMM as the method but made adjustments to comparables, resulting in a transfer pricing adjustment. The DRP partially favored the assessee, but the AO made the final adjustment. The only challenge was the inclusion of MPS Limited as a comparable. The functional profile of the assessee was crucial in determining comparability. The assessee provided ITES without a formal agreement, as per a Purchase order. MPS Limited, chosen as a comparable, was engaged in software products besides ITES. The company's annual report and financial statements confirmed its diverse operations, including software products. As the assessee was solely in ITES, MPS Limited was deemed incomparable. The order was set aside, directing exclusion of MPS Limited from comparables for re-computing the ALP. In conclusion, the order was set aside, and the matter was sent back for re-computation of ALP for IT Support Services transaction. The assessee was granted a reasonable hearing opportunity. The appeal was partly allowed for statistical purposes. The judgment was pronounced on 22nd June 2021.
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