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2017 (11) TMI 716 - AT - Income TaxTPA - selection of comparable - Held that - Exercise of selection of comparables has to be done specifically keeping in mind the special nature of assessee s business in developing gaming software. The AO is directed to keep the detailed orders of the Coordinate Bench in AYs. 2008-09 & 2010-11 and can reexamine the issue of TP adjustment afresh after giving due opportunity to assessee. For these reasons, the issues on merits are considered allowed and the order of the TPO/AO with reference to TP adjustment is set aside with a direction to re-do it afresh as directed above.
Issues Involved:
1. Rejection of objections by the Dispute Resolution Panel (DRP) and the timeliness of the Assessing Officer's (AO) final order. 2. Transfer Pricing (TP) adjustments, including functionality, selection of comparable companies, working capital adjustment, various filters adopted, provisions disallowed, and risk adjustments. 3. Charging of interest under Sections 234B and 234C of the Income Tax Act. Detailed Analysis: 1. Rejection of Objections by DRP and Timeliness of AO's Final Order: The assessee contended that the DRP rejected their objections due to a delay in filing, rendering the AO's final order void ab-initio and unsustainable. The assessee argued that the final order should have been completed within thirty days after the due date for filing objections. The DRP did not condone the delay, leading to the rejection of the objections. The assessee cited a similar case, M/s. Planet Online Private Limited Vs. ACIT, but acknowledged that the facts differed. The tribunal referenced the Hon'ble Madras High Court's judgment in M/s. Inno Estates Private Limited Vs. DRP, which upheld the AO's final order despite similar circumstances. The tribunal concluded that the AO's final order was within the time limits prescribed by the Act, dismissing the assessee's grounds on this issue. 2. Transfer Pricing Adjustments: The assessee raised various grounds on TP adjustments, particularly concerning the selection of comparable companies. The tribunal noted that the assessee's business involved developing gaming software, which is distinct from general software development. The tribunal referenced its decision in the assessee's own case for AYs 2008-09 and 2010-11, where it was held that the assessee should not be compared with general software development companies. The tribunal directed the AO/TPO to eliminate general software companies as comparables and identify companies exclusively involved in developing gaming software. The tribunal allowed the assessee's grounds on TP adjustments for statistical purposes, directing the AO to re-examine the issue afresh. 3. Charging of Interest under Sections 234B and 234C: The tribunal did not provide a detailed analysis of this issue in the judgment. However, it is implied that the resolution of the TP adjustments and the timeliness of the AO's final order would impact the calculation and applicability of interest under Sections 234B and 234C. Conclusion: The tribunal partly allowed the assessee's appeal for statistical purposes, directing the AO to re-examine the TP adjustments afresh, considering the special nature of the assessee's business in developing gaming software. The tribunal upheld the timeliness of the AO's final order, dismissing the assessee's grounds on this issue. The resolution of TP adjustments would indirectly affect the interest charged under Sections 234B and 234C.
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