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2017 (2) TMI 117 - AT - Income TaxTPA - computation of ALP - selection of comparable - Held that - DRP is not correct in holding that the TPO can compute the ALP by considering only the two companies which have been selected by the assessee and accepted by the TPO for computing the ALP. Further, the TPO u/s 92CA of the Act has conducted his own search for comparable companies and has arrived at Acropetal Technologies Ltd and Accuspeed Engineering Ltd and the assessee also has accepted these companies as comparables by not objecting to the same before the DRP. Therefore, in view of the fact that the TNMM is the indirect method, requiring a reasonable set of comparables, to arrive at the correct ALP, we do not agree with the directions of the DRP. Disallowance of the claim of the assessee u/s 10A - Held that - We find that the assessment in the case of the assessee before us was still open as the assessee has filed its objections before the DRP against the draft assessment order and the final assessment order is passed only pursuant to the directions of the DRP u/s 144C(13) of the Act. Therefore, the decision of the Hon ble Supreme Court in the case of the CIT vs. Nagpur Hotel Owners 2000 (12) TMI 99 - SUPREME Court is not strictly applicable to the facts of the case of the assessee as in the assessee s case, the assessment order has not yet been passed and the assessee has filed the relevant information before the DRP. Therefore, we deem it fit and proper to remand the issue of the computation of deduction u/s 10A of the Act to the file of the AO with a direction to verify the claim in accordance with law after taking note of Form 56F and other documents filed by the assessee before the DRP. Ground treated allowed for statistical purposes.
Issues Involved:
1. Transfer Pricing Adjustment 2. Inclusion/Exclusion of Comparable Companies 3. Nature of Foreign Exchange Differences 4. Disallowance of Section 10A Deduction 5. Unabsorbed Depreciation 6. Interest under Section 234B Detailed Analysis: 1. Transfer Pricing Adjustment: The assessee challenged the transfer pricing adjustment of ?2,98,95,369 made by the AO/TPO. The TPO had observed defects in the assessee’s method of selecting comparables and conducted an independent analysis, resulting in the selection of different comparables. The DRP upheld the TPO's adjustments but directed the AO to determine the ALP based on only two comparables. The Tribunal, however, held that a reasonable number of comparables are necessary for a reliable TNMM analysis and directed the AO to include Acropetal Technologies Ltd and Accuspeed Engineering Ltd in the final set of comparables, as accepted by both parties. 2. Inclusion/Exclusion of Comparable Companies: The assessee objected to the exclusion of Babcock Borsig Soft Tech Pvt. Ltd. due to the unavailability of financial results. The Tribunal remanded this issue to the AO/TPO for reconsideration. Additionally, the assessee sought to exclude Projects & Development India Ltd, a government company, from the comparables list. The Tribunal admitted this additional ground and directed the AO to exclude this company, citing that government companies operate in different environments and are not comparable to private entities. 3. Nature of Foreign Exchange Differences: The assessee did not pursue this ground of appeal, and it was rejected as not pressed. 4. Disallowance of Section 10A Deduction: The assessee's claim for deduction under Section 10A was disallowed for not furnishing Form No.56F with the return of income. The Tribunal held that non-furnishing of Form No.56F is a curable defect and remanded the issue to the AO for verification and computation of the deduction, considering the form and other documents submitted before the DRP. 5. Unabsorbed Depreciation: The assessee sought relief for unabsorbed depreciation as per Section 32(2). The Tribunal noted that this relief is consequential to the orders of the CIT(A) for earlier years and did not require a specific direction for the relevant assessment year. 6. Interest under Section 234B: The assessee's ground regarding the interest charged under Section 234B was not specifically adjudicated, implying it was consequential to the other findings. Conclusion: The Tribunal provided a mixed outcome, allowing some grounds, remanding certain issues for further verification, and rejecting others. The appeal was partly allowed, and the stay application was dismissed as infructuous following the main order.
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